If you have kids or have prospects of getting them in the future, you have most likely started planning for your finances. While this is all good, it helps to teach them how to handle their finances from a young age. Here are things to do for for kids to ensure they learn how to be financially responsible from a young age.
- 1. Set up a College Savings Account
- 2. Have a Life Insurance Policy
- 3. Things to do for Kids-Include a guardian in your will
- 4. Open a Savings account for Your Child
- 5.Things to do for Kids – Give Them an Allowance
- 6.Talk about finances
- 7. Involve them in some Financial Decisions
- 8. Consider a 529 College Plan
1. Set up a College Savings Account
The first thing a responsible parent should do is to ensure their kids acquire quality education up to the level they desire. A study conducted by the Economic Policy Institute in 2016 found out that Americans who had a college degree from reputable education institutions earned twice the average hourly wage. As you save for your child’s college, don’t’ neglect to save for your retirement. Look for a way to strike a balance and save for these two important undertakings.
2. Have a Life Insurance Policy
Life insurance should be seen as an investment instead of looking at it in terms of what impact your death would have on your kids. Life insurance ensures your children are taken care of in case something happens to you. What’s more, if your life insurance policy matures while you’re still alive, you can use that money to invest elsewhere. Life insurance policies are not an expensive undertaking. For example, a healthy 35-year old can purchase a 20 year $500,000 policy by paying $20 a month.
3. Things to do for Kids-Include a guardian in your will
A will should be prepared years in advance when you’re still wealthy. It doesn’t mean you’re pessimistic about the future but it’s a good way to reduce rivalry over your inheritance. When you prepare your will years in advance, you’ll have time to include all your property which may not be possible in case of sudden death.
In your will, include a guardian who will take care of your property until your kids are old enough to be given the reigns of control. You can name two guardians; one to take care of your kids physically and the other one to take care of your assets.
4. Open a Savings account for Your Child
Your child doesn’t have started walking for you to open a savings account for them. You can open a custodial account in which you can be depositing money until your child attains the age of 18 or 21 when you can hand over the custody to them. One downside to a custodial account is that they are taxed after the first $950. Based on how financially responsible is, they may continue saving or end blow it away in a couple of months.
5.Things to do for Kids – Give Them an Allowance
The opinion is divided on whether kids should be given an allowance, how much, and after doing what. It’s not enough to give your kids an allowance. It’s important to also teach them that they should earn their own money and this can be accomplished by compensating them for completing certain tasks at not necessarily chores. Discuss with your kids about the importance of saving for a rainy day.
6.Talk about finances
In most families, money is a taboo topic which is often discussed behind closed doors among the parents. Instead of dishing out cash, encourage them to come up with legal ways to earn their own money. Introduce such topics as the importance of a bank account, credit cards, and how they work and teach them how to come up with a budget and the importance of sticking to it. Financial knowledge is one of the most important gifts you can give to your kids which is not taught in schools.
7. Involve them in some Financial Decisions
While you can’t have advanced conversations about money such as a mortgage or debt repayment plans, it doesn’t mean you can’t involve your child in simple financial decisions such as preparing a shopping list and family budgeting. Involving them in such decisions instills in them the importance of preparing beforehand before they spend money and sticking with the budgets.
Let the kids learn that the things they love cost money and if they want to enjoy these things, they’ll have to work hard to earn the money.
8. Consider a 529 College Plan
You can choose either a pre-paid plan or a savings plan. A prepaid plan allows parents to save on their children’s tuition fees. The downside of this is that the money cannot be used for anything else.
A 529 savings plan, on the other hand, consists of several investment options such as stocks and ETFs. Experts recommend investing more in stocks while the child is younger and toning it down as they grow older because of the risky nature of stocks. Financial experts also recommend investing the account to the limit to increase the amount of money they earn in the future.