I'm so excited to share the podcast episode of Work It Mommy, where we sat down to talk about Financial Literacy for Kids!
First, it was a pleasure to be invited on this podcast that focuses on women and how they can be the best versions of themselves. Work It Mommy Podcast has had some amazing guests.
On the Work It Mommy blog, we discussed what many moms are asking: When do I start to teach my kids about money and what do I teach first. My reply is, it's NEVER too early. As soon as they start showing interest in money, it's time. Here are a few tips:
When they start counting and get interested in money, it's time for a piggy bank. You can also make this a fun project to get them personally vested in their savings. Try creating a piggy bank out of a container that they can decorate. For instance, my two oldest boys used an old peanut jar container to use as their piggy bank.
Kids around 8 years old will start to be interested in having a Debit Card, especially if they have older siblings. Whether your kids earn allowance or receive money from relatives, a bank account is a perfect place to park this cash. Options like Green Light, allow for your little ones to get their first Debit and learn how to make their own purchases while you, as the parent, maintain control with features such as real-time transaction notifications and being able to switch the card on/off from an app.
At this point, it's a great time to teach kids about Needs vs Wants. All kids seem to think that money just grows on trees and that mom and dad have an unlimited supply of cash. So now is the time to dispel this myth. Discuss how Needs are our basic human necessities such as shelter, clothing and food. Practically everything else is a want. INSIDER TIP: We used vacations as a mechanism to teach needs vs wants. When we traveled, we told our kids that we, the parents, will pay for the necessities such has lodging, meals and any tickets needed to go wherever we were going. Everything else would be on them. You'd be surprised at how your kids will stop asking for everything that they see and actually start paying attention to price tags. This method helped our kids understand that things actually cost money and once that money is gone, it's gone!
When they start working, whether it's an afterschool job or if they start a small business, it's time to teach them to put money aside for their future. This is where our kids need our help because once they start earning a little money, that money will start burning a whole in their pocket! The best way to build their wealth is to set aside a percentage of their income in a Custodial Brokerage Account or Custodial Roth IRA. They'll thank you later!
Custodial Brokerage Account
A Custodial Brokerage Account is an account that can be opened by a parent or guardian on behalf of a child (under the age of 18) at any time for investing. Once the child is 18 or 21 (depending on the state), the funds in the account will then belong 100% to the child. Imagine what type of head start your kids could have if you started investing a few bucks per months since birth!
Custodial Roth IRA
A Custodial Roth IRA is a retirement account that a parent or guardian can create on behalf of a child once they have started to earn taxable income. You can only contribute up to the amount the child has earned. For instance, if your 16 year old earned $2,000 in a tax year, you are able to contribute up to $2,000 to their Custodial Roth IRA. Like the Custodial Brokerage Account, once your child is 18 or 21 (depending on the state), the funds in the account will then belong 100% to the child.
TIPS:
- When applying these steps, use simple age appropriate terms.
-Every kid is different and take that into consideration when deciding when your kids is ready for what financial instrument