Your Child's Financial Future: 4 Ways You Can Help Them
Your child's financial future is important, and there are ways you can help them. Finances are the last thing on their mind, and they do not understand how important it is. You do, however, and getting them started on the right foot will give them a chance of being successful with their finances. Below are some things you can start early to set the stage for their financial security.
Teach your child how to save money from an early age. Set up a savings account for them at your bank in their name. Depending on their age, they may want a new toy, or they may want to start saving for a car early.
Letting them save money teaches them how long it takes to accumulate the cash. Watching their money grow can be exciting, and it will give them more of a chance of saving money later on instead of spending everything they have.
Four Part Piggy Bank
From the beginning, teach them the four-part piggy bank rule. There are piggy banks you can purchase that have four chambers, one for each of the four money choices your child should be taught. Each chamber is marked with something like save, spend, donate, and invest, depending on the piggy bank you purchase.
In the save chamber, the child should put in money for things they want in the far future, such as a car. In the spend chamber, they should put in money for things they want in the near future. In the growing chamber, they should put money in they plan to invest when they get older, such as in mutual funds. The giving chamber is for money they want to use to help others.
This is helpful for older children. You can teach them the concept of spending less than they make. They can also see when money is difficult to manage, such as if their expenses are greater than their income. They can see when their income is greater than their expenses that money is easier to manage. You can visit a financial advisor, who can help set up a financial formula for older children and to get them set up with mutual funds. Check out places like Raymond James Financial Service for more information.
A custodial account can teach your children about investing their money. You can open this account at a mutual fund company. Help them make their investing decisions. Your child can use this money for anything that benefits them until they reach a certain age. In most cases, you will have to manage this money until the child reaches 18 or 21, depending on the state you live in.
If your child is under 19, or a full-time student under 24, you will have complete control over the account. You should, however, go over the fund with your child, teach them how it works, and let them help you make some of the decisions.