Many of our clients have children, and it\u2019s not unusual for the clients to ask us for tips or guidance on educating kids about personal finance, since the subject is generally not covered in school. Yet, research has shown that by age 3, kids can grasp basic money concepts. By age 7, many of their money habits are already set.<\/p>\n
If you have children, you\u2019ve probably thought about how you should teach them about the purpose of money and the concept of saving.<\/p>\n
Today, we\u2019re sharing with you the thoughts of one of our advisors.<\/p>\n
With four young children, I\u2019ve decided to start teaching them about money and saving. I must confess I don\u2019t have all the answers, and helping kids understand what money is and how it works is a \u201cwork in progress\u201d.<\/p>\n To start, I\u2019ve taken each of my children to a local credit union to open an account, have a change machine count their coins, and deposit the funds in a certificate of deposit.<\/p>\n My wife and I explained to them that it will be a little over two years until they can withdraw their money \u2013 side note, this is also a lesson on delayed gratification for today\u2019s \u201cI want it now\u201d culture \u2013 but that the credit union will reward them with extra money as long they keep the CD for the duration.<\/p>\n We show them their quarterly statements each time they arrive in the mail, and so they\u2019re able to see that the interest adds up \u2013 they\u2019re earning about $4 in interest every month.<\/p>\n We\u2019ve also started taking some of the individual stocks that we own and gifting the shares to each child. This passes the tax burden from the parents to the child. They can sell the stock with no tax consequences, and use the proceeds to buy a low-cost, well-diversified ETF (exchange-traded fund). We\u2019re careful not to trigger the so-called \u201ckiddie tax\u201d and are mindful of any merit aid for college that the kids may lose out on by having assets in their own names. While these are small amounts of money today \u2013 on the order of $100 per year \u2013 it will add up over time. We\u2019re hopeful that this will teach them a bit about diversification and tax-savvy planning.<\/p>\n We have yet to broach the subjects of the \u201cRule of 72\u201d or compound interest, but that may be just around the corner.<\/em><\/p>\n We\u2019d love to hear what you did, or are doing, to teach your kids or grandkids about money.<\/p>\n