Tim Connolly

How to Invest For Your Kids and Teach Them to Invest Themselves

Posted on May 11, 2021July 12, 2021 by Tim Connolly

Little boy saving coin in a money jar — How to Invest For Your Kids and Teach Them to Invest Themselves

Many parents are anxious about providing for their children into adulthood but they can start to share this duty by gradually incorporating their kids into money management decisions.

Not only is this a great way to develop financial education for kids, but they will also understand the critical importance money plays throughout their life.

For parents who want to provide a wealthy financial future for their children, here’s how to get started:

Address current financial needs.
Invest in children’s future.
Grow children’s earnings.
Teach kids how to invest in themselves.

Address Current Financial Needs

It’s never too early for parents to start including their children in money decisions. There are many investing tools to utilize to jump-start their investments.

If you’re opening a savings account for a child, you can establish a custodial account where the parent is the guardian or custodian of the account and the child is the beneficiary. The guardian controls the account until the beneficiary reaches age 18 or 21, depending on state laws.

A custodial account can be set up at a bank or an investment firm. In a custodial account, you and your child can decide to invest in individual stocks, mutual funds, exchange-traded funds and other investment securities.

Although the adult opens the account on the child’s behalf, the legal holder of the assets is the child. Making investment decisions jointly is not only a valuable learning experience but can help the child take early ownership of their account.

The custodial account makeup is beneficial to parents since investment income from custodial accounts in the form of interest, earnings or dividends is taxed at a child’s tax rate, which is lower than that of the parents.

On the first $1,100, the tax rate may be as low as 0% and unearned income more than $2,200 may be subject tax using rates and brackets for estates and trusts.

Those looking to establish good money skills should start with the basics, recommends Howard Dvorkin, chairman at Debt.com, in Fort Lauderdale, Florida. Dvorkin recounts going to the bank as a young man with his parents and opening a savings account. He explains how he repeated this process with his own kids.

“At a very early age, I took my kids to open their savings accounts, where they physically deposited checks. When the account hit a certain balance, I was able to open money market accounts for them to earn more money,” Dvorkin says.

The biggest mistake people make in investing is they don’t have the right outlook in investing money, says Timothy McGrath, managing partner of Riverpoint Wealth Management in Chicago.

“The rule of thumb I use: If you need the money in five years or less it should be in a savings, CD (certificate of deposit) or money market account or someplace that it’s liquid. If you need the money in less time than that, there’s a possibility you could invest your money and not get back what you put in initially,” McGrath says.

If children receive monetary gifts from relatives throughout the year, parents may want to set this money aside for their children’s future

“However, if your child is 14 years old and you decided to save gifts from relatives now to use for college, this money shouldn’t be invested in stocks or bonds,” he says. “Rather, you want a more liquid position since there’s not enough time to weather a storm.”

How Parents Can Invest for Their Children’s Future

For parents or guardians looking to fund their children’s education, a 529 tax-advantaged account is an optimal savings vehicle for K-12 tuition or college tuition.

A 529 plan, otherwise known as a qualified tuition plan, is a tax-advantaged savings account used for education expenses. Unlike other tax-advantaged savings accounts, a 529 has no income limits for plan contributions.

Anyone can contribute to a 529 plan, whether it be through monthly contributions or gifts from friends and family.

Withdrawals from a 529 account paid toward qualified education costs are not subject to federal income tax on capital gains from investments. However, 529 funds used for noneducational expenses are bound by federal state and income taxes along with a 10% federal tax penalty on earnings, and it may be subject to state income taxes.

A 529 is more flexible than a traditional savings account. For example, if the original beneficiary decides not to attend a trade or vocational school, college or other postsecondary educational program, the account can be transferred to another child or family member as the new beneficiary.

Earnings from 529 plans grow tax-free over time. The earlier an account is opened for the beneficiary, the more time the funds are invested, which translates into greater earnings.

When choosing a 529 plan, make sure it is affordable, says Ksenia Yudina, founder and CEO of UNest, an app that families can use to save and invest for college. in North Hollywood, California.

Depending on which state you live in, you may have an opportunity for tax breaks for opening and contributing to a 529, and minimum contribution requirements vary. This is beyond the reach of many families, Yudina explains.

“Look for a plan that’s easy to manage. Without a family-friendly interface or good online or app-based resources, it can be tough for families to review their progress or change their contributions,” she says.

Grow Children’s Earnings With a Roth Account

“Clients are always asking me, ‘I want to help out my kids down the line, what should I do to help them out?’ To me one of the best things they can do is open them up a Roth IRA” McGrath says.

The minor qualifies for a Roth IRA once she has a job and earns annual income.

“A Roth IRA can show them the true value of compounding. Assume your teen earns $4,000 this year. Have her put $2,000 of those earnings in a Roth IRA,” says Philip Weiss, principal at Apprise Wealth Management in Baltimore.

If she has 50 years until retirement and earns an average return of 5% a year, it will be worth nearly $23,000 when she retires, Weiss details.

Teach Kids How to Invest in Themselves

Starting at a young age, children must be taught to save money and that people cannot become wealthy by living beyond their means, regardless of their income bracket.

“I ask my clients: ‘What are you doing to raise financially responsible children?’ If you want to teach your children anything, you should teach them how to budget and save,” McGrath says.

If you aren’t sure about finances, start by doing research and steadily become well-versed about personal money management in the near and long term.

“As consumers, we are constantly hit with advertising and promotions. This is subjecting our children to the concept of spending on material items rather than saving.”

Factoring in some of these financial tools along with your children’s participation is an invaluable learning development for financial literacy and will help them understand that budgeting and saving are what will create a path for a financially successful future.

5 Money Management Tips For Teenagers

Posted on April 16, 2021July 12, 2021 by Tim Connolly

Tips for teenagers to save money | Glob Finances — 5 Money Management Tips For Teenagers

Shortly after my now-husband proposed to me, he broached a delicate subject. After dinner one night, he sheepishly looked at me and asked me to reveal a part of myself that I hadn’t previously shown him. As I considered his question, I wondered if I could go all the way.

Could I trust this man? How well did I really know him? After four years of dating, I had agreed to marry him, and though my 23-year-old self was nervous, I looked at him and said yes to his request. I slowly got off the couch, sauntered to my bedroom drawer, and pulled out my checkbook.

We spent a long evening revealing our financial pasts to each other in preparation of our upcoming union. Honestly, it was more eye-opening than when we shared our sexual histories when we met four years prior.

Looking back on that conversation and thinking about how inexperienced we were financially as college kids, it’s made me realize that we have our work cut out for us as we prepare our teenagers to become more financially independent.

As parents, we don’t want to see our kids struggle, and it’s our natural inclination to want to help when the going gets tough for our teens, and that’s why its important to focus on how to teach kids about money.

As money management is an important life skill, and considering the staggering debt millions of Americans carry monthly, there are ways we can help our kids be smarter about their money choices.

At the very least, we need to make sure they aren’t calling home every weekend for beer money while they are away at college. Here are some suggestions:

1. Teach your teen how to budget.

We all heard our parents yelling, “Money doesn’t grow on trees!” as we grew up. And now that I have a mortgage, I understand why my dad was apoplectic when the credit card bill arrived every month. Take time to sit with your kids and sketch out a realistic budget for the income they have and help them budget their funds appropriately.

The business of being a social teen isn’t cheap and helping your teen create a balance sheet can be the springboard to sound money managing when they become adults. Stress the importance of getting a part-time job to save money for future college expenses and help them put those funds in an account that they can draw on for their expenses. Be honest with your teen about your own budgeting wins and fails and you’ll be surprised at how much they are willing to learn.

2. Teach your teen basic accounting skills.

On the night I showed my now husband my checkbook, he was appalled at my clear ineptitude for balancing my budget every month. And by “budget,” I mean my “close my eyes and yell ‘No Whammies!’” method of spending money. I lacked the skills necessary to adequately keep track of my limited funds and by the time I graduated from college, my books were a mess.

These days, accounting is a breeze with the advent of software and apps that can track spending. Familiarizing your teen with these programs before they hit the dorm will lead to a lifetime of strong accounting skills. And, trust me, it’ll spare your teen from an embarrassing conversation with their future spouse.

3. The parental buck has to stop eventually.

At some point, you will have to have a conversation with your teen about taking on the responsibility of their personal spending habits. Whether you make them responsible for their gas money, contribute to their car insurance bill, or ask them to foot the bill for their prom attire, encouraging your teen to pony up for some of their expenses in high school will teach them valuable lessons in budgeting and money management.

Having a part-time job in high school not only makes financial sense, it will also prepare your teen for the time management necessary when they are juggling college courses on a busy campus.

4. If you don’t have it, you can’t spend it.

Credit card companies practically salivate over teenaged applicants because of their financial inexperience. Talk with your teen about the realities of credit card debt: interest rates, credit scores, and missed payments can significantly impact their ability to make larger purchases as adults.

Gently remind your teen that a $25 dinner charged on a credit card can wind up costing them $75 with interest rates and late fees if they aren’t careful with credit card use. Encourage your teen to use a debit card drawn on their checking account to not only help them budget their money but to also curb impulse spending. If they don’t have the funds, they’ll have to save a few pennies in order to buy those new sneakers.

5. Clearly define what constitutes an “emergency” and hold your ground.

Many parents give their teen a credit card for emergency purposes. While this is prudent in theory, often the lines between what constitutes an emergency are blurred for teenagers. Clearly spell out your financial boundaries for your teen.

Those Brandy Melville shorts from Pac Sun? Not an emergency. Stranded on the side of the road at night with no gas? Definite emergency. Set clear boundaries with your teen and if they step outside those lines, expect payment back in full — with interest — because money doesn’t grow on trees, right?

Parenting, teaching kids about money

Teach your teen to invest now to set them up for a financially healthy life

Posted on April 16, 2021July 12, 2021 by Tim Connolly

Teen debit cards: A real-world way to teach your kids about money — Teach your teen to invest now to set them up for a financially healthy life

Teaching kids about money and how to save is a valuable first step toward learning how to manage money. But it shouldn’t stop there. While savings accounts are a safe bet and an easy concept to grasp, the real earning power comes from investing their hard-earned cash.

That’s because kids possess a very powerful gift: time. The earlier your child starts investing his or her money, the greater the rewards are later. That’s due to the magic of compounding, wherein the gains continue to grow, because each year money is made from the previous year’s profits.

5 ways to introduce investing to your teen

1. Explore investing as a family to teach the keys to long-term wealth. Work with kids to pick stocks of companies whose products and services they understand and use. Encourage them to research the companies to understand what they do. Together, look at their performance now and discuss how it might change in the future.

2. Teach them that investing is about the long term. Encourage kids to invest only money that they don’t need in the short term, because most successful investors take a “buy and hold” approach to investing. Share stories and books about successful long-term investors like Warren Buffett and Peter Lynch.

3. Start small and learn from mistakes. Show kids the power of investing with a small sum of money so they can make mistakes and learn from them without it costing a large amount. Some investing resources allow you to invest in fractional shares, lowering the risk and barrier to entry

4. Invest in something you care about. Encourage kids to invest their money in something they care about, as they will be more interested in following their investments and watching their money grow. You can also explain that many people invest in index ETFs and “index mutual funds – which invest in all of the companies included in a specific index, like the S&P 500.

5. Make it a habit. When kids earn or receive money — whether from gifts, allowance or chores — encourage them to invest a portion of it, because it will help them build the healthy financial habit of saving and investing.

“We need to change the mindset of this next generation. Student loan debt is at an all time high, consumer debt is at an all-time high, national debt is at an all-time high. I think we really need to change the way we do this with the next generation or we’re in big trouble.

Sheehan agrees: “Raising a financially smart generation can lead to a healthier generation — one with less financial stressors — which allows everyone to reach their full potential. Imagine what that world would be like.”

money management, teaching teens

5 key budgeting basics for teens

Posted on April 16, 2021July 12, 2021 by Tim Connolly

Before your teen leaves home, they should know how to create a budget, how to track spending, and how to save for the future, and its your responsibility to teach money management to children. While budgeting may seem like a hassle to some teens, research shows that young people who have good financial habits early on often grow up to be financially responsible adults.

1. Create a Money List – Sit down with your teen and create a list of everything they consume regularly. Aliche says that money lists allow young people get a physical picture of their money and the ins and outs of their spending habits. At the top of the money list, have them write down their monthly income.

2. Next, go through the list and write down how much they spend on their expenses which can include their bills, food, entertainment, clothes, and school supplies.

3. Finally, have them add up all of the items on the list and subtract it from their available resources and then they will have an idea of how much they have left over to spend on other stuff or better yet, save!

Once they have compiled this list and understand what each expense costs, they will be able to plan their spending. This can be done by writing it down in a notebook or by using a spreadsheet, such as Microsoft Excel or Google Sheets.

From there you can continue the conversation about the importance of budgeting. Here are a few budgeting basics you can share with them.

Track spending

It is important a young person sees from where their money comes and to where it leaves. Over the course of a month, have your teen record each and every purchase so they can better visualize their spending. According to the American Institute of Certified Public Accountants, showing your child how to save and calculate receipts is one way to help them keep their spending on track.

Identify income

Will they be spending money from a monthly allowance, financial aid, or wages from their job? Help them understand the importance of planning. Have them write down their monthly expenses like rent, laundry, food and monthly bills. Talk to them about unexpected or emergency costs and the prudence of establishing a “safety net” savings account.

Be a role model

Budgeting is a tool and if you show them how you use it habitually it will become second nature to them, too. She says when it comes to money behaviors kids take their cues from their parents; being a good example of healthy financial habits is the best teaching you can provide. A couple of ways to do this can be to pair financial lessons with what’s important to them and by doing your bills in front of them.

Emphasize saving and giving

Another key component to budgeting is saving. When young people save, Aliche says that it helps them build towards wealth.

A helpful way to do this is to create “spend,” “save,” and “give” accounts. Percentages of the money your teen saves can be deposited in their bank account, be invested, donated or spent on their financial responsibilities and fun.

Aliche recommends the following percentage allocations for deposits into each account:

Savings and investing – 20% of their income should be deposited into their savings account for a rainy day, a big-ticket item, a vacation, or a venture that they would like to invest in.
Giving – 10% of their earnings can be put away in the giving account to be used towards donations to a charitable organization
Spending – 70% of their money should be spent on necessities like bills, groceries and toiletries. Once they’ve handled their business they can treat themselves.

While your teen’s commitments and obligations may change, specifying percentage goals for their money is a great way for them to stay on track.

Consider digital help

Not everything has to be done on paper. In fact, there are an array of mobile apps and websites that can help with budgeting, saving, and keeping track of all your finances.

These mobile apps can help your teen stay on top of their money spending habits while they’re on the go:

Mint – Has a website and mobile app that allows you to create budgets, track spending by category, and provides personalized tips and advice about your money. The app can be linked to your bank, credit, and loan accounts and updates automatically.

GoodBudget – Mocks envelope budgeting. If you and your teen are splitting some expenses, this might be a good fit. Within the app, your teen can share their budget with you through their cloud technology.

Prosper Daily – Helps with budgeting and to protect credit and debit cards from fraud and error. The app links to accounts and shows analytics from every transaction made.

As you and your teen plan for their finances after high school remember that you are their financial advisors and examples. What you teach them, and how you handle your own money, will help them when they are on their own.

Financial freedom, money management, teaching kids about money

10 Money Tips for Teens

Posted on April 16, 2021July 12, 2021 by Tim Connolly

Etiquette for Teens: Tips for Teenagers from an Etiquette Pro — 10 Money Tips for Teens

If you have teenagers – or you remember being one – then you’ve probably noticed that managing money can be challenging, even long before adult responsibilities like mortgages enter the picture. That’s because teens are usually faced with tight budget constraints and lots of wants, ranging from the latest sneakers to nights out with friends.

Teens also have a hard time saving for some distant future that seems impossibly far away, so convincing them to set aside a portion of their spending money can be difficult. If you’d like to help instill strong financial habits in your teens now, and help them avoid the headaches of credit card debt and other problems later, then a handful of new books are here to help.

Kara McGuire, a money columnist and consumer strategist, wrote “The Teen Money Manual” because she thinks there’s not enough information geared to people when they’re young, before they have money, so they get off to a good financial start. “One thing that’s always driven me nuts is that we only start paying attention to people once they have money,” she says.

Here are 10 suggestions from these money authors that will help you in how to teach kids about money to get a solid start:

1. Be open.

Danny Kofke says a lot of people get into trouble by being secretive about their money with their children. “Talk to your kids about how much you make and your expenses each month.

This is how much we have a month – and we pay for the mortgage, TV, the bills, food – and this is what we have left over at the end,’” he says. That way, he and his wife use their budget to explain why they can’t buy a new toy or electronic gadget.

2. Share real-life examples.

One Christmas at the Kofke house, Ava really wanted a Nintendo DS, but it was too expensive for the family budget, so she didn’t get it. A few days after the holiday, the Kofke’s home heating system broke, and the repairs cost about as much as the Nintendo DS.

“I showed her, ‘Look, this is what happens. If we had bought this, we wouldn’t have had the money to pay for [the repair], and we would have had to put it on our credit card,’” he says. That helped his daughter conceptualize the idea of emergency savings and how it can come in handy.

3. Get them a debit card.

This tip might be controversial, Kofke acknowledges, but he recommends it because he thinks it’s important for teens to have experience handling both virtual money and cash. A debit card will allow teens to see whether they spend money more easily when it’s virtual, and they can prepare to take extra care when using credit cards as they get older. “[Society is] almost going cashless, so I think it’s OK to start letting them experiment with a piece of plastic, but not a credit card,” he says.

4. Encourage them to make some money.

Even young kids can earn money for helping neighbors with yard work, as McGuire’s 8-year-old son has done, and practice saving birthday money, as her 5-year-old son does. Her daughter, who is almost 11, is also starting to earn money baby-sitting. That kind of entrepreneurial practice can help them get comfortable with making and managing their cash.

5. Start the savings habit.

McGuire says getting into the habit of setting money aside when you’re young can set up a lifetime of healthy saving. “It’s especially important for this generation. We know college is more expensive and careers are taking longer to build,” she says.

Saving for the future can be an abstract concept for teens, but parents can involve them in conversations about saving for college to help them start thinking about it. “Kids need to get much more involved in the family conversations around college costs,” she says.

6. Protect their privacy.

When medical forms at the pediatrician’s office ask for your Social Security number, Beacham says you should explain to your teen why you are leaving that section blank – because Social Security numbers should only be shared when absolutely necessary. “My kids will say, ‘No,’ and put a line through it, because that’s what I’ve taught them from day one,” she says.

7. Write down their needs versus wants.

Beacham suggests encouraging teens to write down their needs and wants on a piece of paper to help them prioritize how to spend their money. That central tenant of budgeting can help them move closer to their goals, whether it’s owning a new pair of trendy sneakers or going out with friends for pizza on Friday night.

8. Help your teen think about her goals.

Beacham says teens should be really specific. “Don’t say, ‘My goal is to have fun.’ Say, ‘I’d like to go out for pizza with my friend next Saturday.’ Let’s set goals and be specific. Then let’s do some planning on what money you have coming in and what can be set aside to meet your goals,” she says.

9. Give generously.

Ava Kofke says her favorite money lesson from her dad is giving. “Even though [my sister and I] don’t have a lot of money, we would give 10 percent of our money to church, or bring cans of food in,” she says.

10. Let them make mistakes and pay the price.

Some lessons, like investing in a diversified portfolio or having an emergency fund in case of a car accident, are difficult to learn until you learn them the hard way. “It’s all about having your own skin in the game.

It won’t be until their first car accident and they’re paying the $1,500 bill that they really get it,” Beacham says. That’s why it’s important for parents to know when to step back and let their teens struggle and handle unexpected expenses themselves.

financial education, teaching kids about money, teaching teens

Avoid Teenage Money Problems with These Top Financial Tips for Teens

Posted on April 16, 2021 by Tim Connolly

The 7 Best Personal Finance Books to Read in 2021 - Erin Gobler — Avoid Teenage Money Problems with These Top Financial Tips for Teens

Hey, teens! Your parents may give you some cash toward the things you want to buy, but you may feel better if you could earn and save money to put towards your goals. This is why it’s important to know how to handle personal finances and how important financial education for kids is.

These are the Top Financial Tips for Teens

Use Time Wisely

If you’re not making a lot of money, it doesn’t matter. What matters is time, and your money will have a lot of it because you’re young. For example, if you have a summer job and at the end of it you saved $1,000, you save that money a variety of ways, including:

Opening a savings account or open one with your parents so that you receive a higher interest rate.
Giving a portion of your money to your parents to invest in a business, stocks, bonds, or real estate.
Save your money at home, add to it, and then invest it.

If you invest your $1,000 at a rate of return of 5% and don’t do anything else for 50 years, you will have $11,467.49. At the end of 30 years, you would have $4,321.99. Imagine how fast your money will grow if you start saving very early. Time is on your side right now so take advantage of it.

Get into the Habit of Saving

I’ve touched on saving in the first point, but it begs to repeat. If your parents saved your birthday or holiday money since your birth, you’re off to a great start. Keep the momentum going by saving any money given to you by your grandparents, parents, and other relatives.

When you get older, you could do things around your neighborhood, such as shoveling snow, babysitting, or mowing lawns. Save the money you receive because it will add up over time.

Create a Budget

It’s a good idea to have a teenage financial budget. Why? Because as you get older, you may prefer paying for certain items such as makeup, clothing, and bath and body. Keep in mind that a budget for high school students may have more expenses.

For instance, if you have a car, you’ll have to budget for gas, insurance, and repairs. However, your parents may help pay for the latter. You want your income to exceed your expenses. If it doesn’t see where you can save decrease your expenses.

Track and Lower Your Expenses

Not only can you make deposits at the ATM, but when you swipe your debit card, you can track your spending. It’s a great way to manage your money. And if you notice your balance getting low, it means you’re spending too much and time to save more money.

Establish a Credit History

Your parents can help you establish a credit history before you go out on your own, which is better than dropping you off at college, handing you a credit card, which essentially says, “Good luck. Go be responsible.”

Ask your parents to add you as an authorized user on a credit card. They don’t have to give you access to it. However, adding you to the account opens a credit file in your name. Once this happens, you’ll want to check and understand what makes up a credit score.

Think Carefully about College

With student loan debt on the rise, you may want to delay college or opt for community college since the tuition costs less than a four-year university. If you know that you want to go to college, open a College Savings Account so that you can save money for school. You can also apply for grants and scholarships and inquire about paid internships.

Take Advantage of Your Student ID

Did you know that your student ID could help you get up to 10 percent off at retailers such as Levis, Apple, and other retailers? Think about how much you can save because of discounted prices. Keep in mind that some businesses may not promote student discounts, but all you have to do is ask!

Get a Summer Job or Start an Online Business

You could get a summer job or ask your parents to help you start an online business. For example, if you like to bake cupcakes and other sweet treats, you could open an online bakery business. Ask your friends and siblings to help you with making deliveries. Or maybe you could be a camp counselor or tutor summer school students. Think about what you love to do, a hobby perhaps, and get help turning it into a business.

How Much Should a Teenager Save?

You may ask yourself, “What should I save up for as a teenager?” If you want a big-ticket item such as an iPhone or something else, you’ll need to cover the initial cost and any other expenses. Only you know if something is worth it or not.

Being a smart money manager means that you can delay instant gratification so that you can build your savings. It may not be easy, but when your bank account grows and grows, you may have enough funds to pay for something really special and still have money left over.

financial education, money management, teaching kids about money

Help Your Teen Build Strong Financial Habits

Posted on April 16, 2021 by Tim Connolly

30 essential money habits | Las Vegas Review-Journal — Help Your Teen Build Strong Financial Habits

You’re never too young to start budgeting. Now, your teens may not agree, but the reality is, learning key financial skills while they’re young builds strong, positive habits that will provide immeasurable benefits later on in life.

I want to partner with you to empower your teens to make a profound impact on the way they view and use money, because financial education for kids sets your child up for success.

Though they may not have a mortgage or car payment just yet, the practice of budgeting for teens gives them the tools of discipline and perspective, empowering them to thrive no matter where they go. That’s why I’ve compiled a list of top budgeting tips for teens:

Tip #1: Discover your teen’s financial habits

First things first — before trying to change your teen’s financial habits or build new ones, you need to know what habits they already have.

Sit down with your teen and take time to go over what they spend within a given period of time. I recommend reviewing your personal spending habits alongside your teen’s so they can gain perspective on what their expenses may look like when they’re older!

Start by reviewing your spending from the last full month, then compare that spending to a few prior months to get a sense of which items are purchased out of habit, and which are occasional purchases.

These patterns show you and your teen your current purchasing habits. This is a great opportunity for conversation — don’t be afraid to enter into an honest discussion on where you could personally improve your current purchasing habits! This builds trust and confidence in helping them handle their finances.

Tip #2: Sort your teen’s spending

Taking the purchasing habits you’ve discovered, have your teen sort their recent purchases into one of these four categories:

Fixed costs
Investments
Savings
Guilt-free spending

Write down each expense and then label it with one of these four categories. Now, i do recognize that if your teen still lives at home, most of their spending will fall into category 4. But the goal of this exercise is to get your teen to start critically thinking about the purpose behind their spending.

Tip #3: Review a healthy adult budget

In this next step in budgeting for teens, I want to prepare your teen for what a healthy, balanced adult budget looks like. Review the following recommended breakdown for what each category should comprise of your total income:

Fixed costs: 50-60%
Investments: 10%
Savings: 5-10%
Guilt-free spending: 100% minus the total % of categories 1-3.

Adjusting the budget for at-home teens:

For categories 1-3 of this conscious spending plan, at-home teens don’t necessarily have the need to meet those recommended percentages. Here’s what i suggest to adapt this method of budgeting for teens so that they can internalize a changed view of these purchases:

Fixed costs: Try having your teen pitch in for things like gas when they use the car, groceries if they want something that’s not on the family list, or even a portion of their phone bill.
Investments: Have your teen use easy, simple, and low-risk investment apps like Acorns or Betterment, and affirm how each dollar they invest is actively growing for them in the long-term.
Savings: Set a savings goal with your teen so that they avoid (or break) the habit of spending every dollar they make. I highly recommend setting a percentage goal rather than a lump-sum goal.
For example, have your teen set goals like “I’m going to save 3% of every dollar I make this month,” instead of, “I’m going to save $100.” Percentages develop a perpetual saving mindset, whereas lump-sum goals encourage you to quit saving after your goal is reached.

Tip #4: Make sure the budget ends with “$0.”

Before you get worried, i don’t want your teen to plan on having $0 in their bank account. Instead, i actually suggest you set a “minimum threshold” of at least $100 that they begin to view as “$0. ”In other words, the bank account should never drop below $100.

By saying “make sure the budget ends with “$0,” i mean that every dollar of income your teen receives each month should be accounted for in one of the four conscious spending categories i have mentioned above.

If your teen is focused on just paying their expenses and spending the rest of their money, the critical skills of saving and investing are easily pushed aside. By making sure every dollar is spent on one of the four categories i have laid out, your teen can manage their savings and investing goals with ease.

financial education, money management, teaching kids about money

7 things you can do now to solidify your child’s financial future

Posted on April 12, 2021April 12, 2021 by Tim Connolly

3 Important Financial Decisions You Can Make to Help Protect Your Child's Future — 7 things you can do now to solidify your child’s financial future

If you have kids, or are considering having them, you’ve likely started thinking about what that will mean for your finances. But have you thought about how you can help your kids become prepared for their own financial future? There are plenty of things parents can do now to help set their kids down the right path financially. Here are a few.

1. Set up a College Savings Account

One of the most important things you can do is to consider how (and if) you’ll help them obtain a college education. An analysis of Labor Department statistics by the Economic Policy Institute found that in 2016, Americans with four-year college degrees made almost twice the average hourly wage compared to those without a degree.

So a college degree is still important. However, you should never save for your child’s college at the expense of saving for your retirement. Instead, consider whether, and how much, you can responsibly save for both. (You can read this to help you get an idea about how much is enough when it comes to college savings.)

2. Have a Life Insurance Policy

Don’t think of a life insurance policy in terms of what would happen to your kid if you die. Consider it a way to ensure your child is taken care of in the future, no matter what happens to you.

A life insurance policy helps provide your spouse or child’s guardian with the financial means necessary to raise a child. And coverage is more affordable than you think. A healthy 35-year-old woman can purchase a 20-year, $500,000 policy for about $20 per month.

3. Put a Guardian in Your Will

Putting together a solid will so your child will be taken care of if something happens to you should be a top priority when estate planning. Picking the best guardian for your child is equally important.

You can name two types of guardians — one to physically look after your child and one to look after their assets. Think seriously before simply naming your mom or best friend as your child’s guardian.

4. Open a Savings Account for Your Child

When it comes to helping kids become financially savvy, teaching them how to save — and why savings are important — is crucial. Your kid doesn’t have to be walking yet for you to open a savings account in their name.

Ask your bank about a custodial savings account. Once your child is old enough for an allowance, you can discuss why everyone should have savings and how much to put away. Many experts say saving 20% of your income is a good way to build up a safety net.

5. Give Them an Allowance

Experts differ on whether giving kids an allowance helps them become financially savvy, how much to give and for what purpose (just to help them save, or in conjunction with chores, etc.).

Research from T. Rowe Price, an investment management company, showed that children who receive an allowance are more likely to think they have a good understanding of basic financial topics than those who don’t get one.

The important thing is to not give your kid an allowance and let him do with it what he will — you need to focus on teaching kids about money and its value, as well. Discuss the importance of earning money and how to make it last.

6. Talk About Your Finances

Money is often a taboo subject in families, but it shouldn’t be. Consider talking to your kid about money early and often. A 2014 study from North Carolina State University and the University of Texas found that children pay close attention to issues related to money. Make sure you’re filling them in on the important facts.

7. Involve Them in (Certain) Financial Decisions

Your young child probably won’t help you save for a down payment on a new house or have detailed conversations about your debt-repayment plans. However, there’s no reason they can’t help put together a grocery list and come shop with you while you discuss how food costs money and the importance of family budgeting.

Or perhaps on vacation, your kid can help decide how family money will be best spent on a few outings or can watch you fill up the gas tank to get an understanding of how much your road trip costs.

Teach your kid early that it costs money to do fun things and how saving helps you achieve certain financial goals. You might be surprised how much your kid remembers later from your early — and repeated — money conversations in the future.

Financial freedom, money management

Financial Literacy for Kids to Teach Good Money Habits

Posted on April 12, 2021 by Tim Connolly

Financial literacy for kids can seem intimidating, especially if it’s a skill you don’t feel equipped with yourself. While the socio-economic backgrounds of children can impact opportunities they may face, helping them feel prepared about money can influence their overall relationship with it.

Don’t shy away from difficult topics, like the possibility of debt and applying for a credit building loan, when having money conversations with your children. When you focus on teaching proper money management to children early, they’re more inclined to make effective financial decisions throughout life.

This post shares 15 carefully selected games and activities to teach kids of all ages money management best practices to make more confident decisions when it comes to their wallets.

Teaching Financial Literacy

Teaching financial literacy at a young age creates opportunities for a better financial future through effective money management. Surprisingly, children as young as preschool-age can learn basic money skills that will help them navigate the complexities of finances later in life.

Start with the basics.

Consider the key components of financial literacy when teaching your children about money.

Earning: Explain the different ways you can generate income such as investments, day-jobs and careers, and charitable donations and assistance.
Saving: Teach your children to withhold a portion of their income to reach a financial goal like buying a house or going to college.
Investing: Talk to your kids about different ways to invest money including saving it in accounts with a high annual percentage yield or by investing in appreciating assets.
Spending: Explain how to be accountable for your spending to live within your means, like how to calculate a realistic budget and stick to it.
Borrowing: Teach your child about how to borrow responsibly. Help them understand the importance of paying back loans to build credit and how borrowing money responsibly can be an investment in their future.

Financial Literacy Activities for Preschoolers

Allowing your child to make decisions early on helps make the decision-making process easier as they continue to develop. Follow these simple financial literacy activities for preschoolers to help teach them the basics like identifying and counting money.

Coins and Dollars Matching Activity

First things first. Your little one needs to know how to recognize coins and dollar bills. Use this simple matching game to teach them to identify pennies, dimes, quarters, and different bills. All they need to do is draw a line from one currency to its matching counterpart. If they’re not ready to hold the pen, have them point to the correct answer and help mark their choices.

Counting Money Games

The sooner your child starts practicing basic math, the easier it will be to understand how money is earned and spent. These games are easy for young children to practice with or without parental supervision to understand the basics of counting money.

Counting With Coins (U.S. Mint)
Peter Pig’s Money Counter (Practical Money Skills)
Color and Count Coins (Enchanted Learning)

Financial Literacy Activities for Elementary Students

When your kids reach elementary age they can start to grasp concepts like earning and saving money. These activities teach them about the limited quantities of resources and help create a foundation of needs and wants plus the time and effort it takes to save for each.

Personalized Piggy Bank for Saving Money

In this activity, your child can visually see savings accrue by placing money in a clear jar until they meet their financial goals. Doing so introduces them to the concept that saving earns them a reward.

Help create your child’s personalized piggy bank in five simple steps.

Step 1: Help create the saving goal for your future finance extraordinaire and write it on the printable tag.
Step 2: Cut the label on the dotted line.
Step 3: Assist your child with poking a hole in the tag.
Step 4: Use a string to tie the label around a clear jar.
Step 5: Have your child mark off each day, or week, that passes in the blank boxes until they reach their financial goal.

Need Versus Want Activity

Understanding basic needs versus wants is critical in developing financial literacy for kids. Your child should understand what basic human necessities need to be met before they can use their income to purchase other wants. Print this simple activity and have your little one circle the items that are necessities versus wants — then have a candid discussion about any discrepancies.

Financial Literacy Worksheets Middle School Students

Middle school tweens and teens are developed enough to understand more complex topics. Not only can they understand what they’re spending money on, but they’re ready to record income and expenses, plus familiarize themselves with more complex financial terminology.

Credit Score Word Search

Although your teen may not fully understand an annual percentage rate or debt-to-income ratios just yet, exposing them to these terms will get them comfortable with financial processes, like building credit, by making them seem less intimidating down the road. This word search defines a credit score and features 20 words that are associated with borrowing money.

Budgeting Games

A budget that accounts for every cent can help people save more and spend less by making decisions on what they want to pay for and what’s worth saving money on. These immersive games help tweens and teens visualize budgeting in real-life scenarios.

Spent (Names for Change)
Money Magic (Play Money Magic)
Gen I Revolution (Council for Economic Education)

Financial Literacy Activities for High School Students

Once your child reaches high school, they’re likely working, considering colleges or trade schools, or learning how to manage their time and resources in more intricate ways. By this age, they should have a simple understanding of taxes, simple interest, credit, and debt. By gamifying this complex financial material, high school students have an opportunity to grasp these topics in real-life situations to further build their skills in an engaging way.

Tax, Simple Interest, and Debt Activity

These word problems aim to provide financial scenarios young adults may face in the real world. The problems challenge them to calculate tax on their own, understand how simple interest can grow investments, and how quickly debt is accrued on a loan — plus how long it takes to pay back even a small borrowed amount.

Financial freedom, money management

3 Financial Education Tips for Kids

Posted on April 12, 2021April 12, 2021 by Tim Connolly

19 Ways to Teach Kids How to Save Money Responsibly at Any Age — 3 Financial Education Tips for Kids

Financial education is not just saving for a rainy day but learning to handle one’s finances wisely. Financial education for kids must begin as soon as they start asking you to buy things here and there, so they know how to value and work hard for their money.

From piggy banks to passbooks and now to debit cards for kids, the ways of how to save money has progressed as the years have passed. Below are some financial education tips for kids (and parents) so they would be financially literate as early as now.

1. Start saving.

One of the most important lessons a parent can impart to his/her child is the art of saving. Piggy banks are the simplest but most effective way of introducing saving to your kids.

Ask them to keep those loose change instead of buying candies or toys and surprise them at how much they have saved up in just a couple of weeks.

2. Career Day.

Do you have those bring-your-kids-to-work days? Let them experience a day in your work and explain to them the meaning of a job or career. It would be a good idea to introduce to your kids where the money comes from and how one gets it. Discuss with them the idea of having careers when they grow older and become adults.

But having a “career” can start soon for these youngsters. Hire them for odd jobs around the house and give them their “salary” for the day. That way they would understand that money comes from hard work and should be valued.

3. Budgeting is the key.

Give your child a little challenge. Give her $5 and bring her to the mall. Ask her to buy two things she likes, but the total should not exceed $5. Let her have fun choosing while you also enjoy and observe how and what she will end up buying. After this challenge, discuss with her that what she just did is called budgeting.

Luckily for this generation, there are what we call credit and debit cards for kids. These cards enable the kids to manage their money wisely and responsibly and at the same time having these cards are safer than carrying cash inside their pockets all the time.

Head on to your nearest bank, and they will surely be willing to teach you how to use credit and debit cards for kids. Start your child’s financial literacy, and you will not regret it.