MOTIVATING YOUR KIDS TO SAVE AND INVEST! YES, YOU CAN!
Disclaimer: Good Day, Readers. WealthBuildingPowers blog is a financial literacy/competency blog and does not provide specific investment recommendations.
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GETTING YOUR KIDS MOTIVATED TO SAVE AND INVEST!
It is neither too early nor late to teach their kids about money and investing and strengthen their odds! I don’t care if they are two or 32; help them build a better future.
BUDGETING
Budget is NOT a four-letter word!
By teaching our kids budgeting, we build the lifelong habit of spending less than we earn.
Sandra’s allowance is $25.00 per week. Sandy also started babysitting to, in her words, “buy more.” Offer Sandra this challenge. You will match her savings dollar for dollar if she saves 20% of her allowance and earnings. One minor rule is that Sandra only receives her match if she saves 20%. Did I tell you Sandra makes A’s in math? DEAL!
Help Sandra create a simple budget. Ask her to find a free budget app she likes. Show her how to record her allowance, gifts, and earnings and where to record all expenses. If you keep a budget, walk her through yours.
Children learn by example, so model good financial habits yourself. This includes sticking to your budget, saving, and avoiding unnecessary expenses.
Discuss how you pay yourself first and where the remainder of the household income goes. Help your children understand where your money goes and why you sometimes have to say wait or even the dreaded NO.
| MONTHLY EXPENSES | COST | PERCENTAGE OF INCOME |
| Savings | $ 1,700.00 | 20% |
| Mortgage/Rent | $ 2,400.00 | 29% |
| Groceries | $ 1,000.00 | 12% |
| Car loan and gas | $ 450.00 | 5% |
| Utilities | $ 300.00 | 4% |
| MEALS OUT | $ 350.00 | 4% |
| SUBSCRIPTIONS AND INTERNET | $ 400.00 | 5% |
| SANDY LUNCH MONEY | $ 100.00 | 1% |
| SANDY ALLOWANCE | $ 100.00 | 1% |
| Credit Card Pay Full Balance | $ 500.00 | 6% |
| Other | $ 1,000.00 | 12% |
OPEN SAVINGS ACCOUNT
Next, open an account to place their savings. Teach them the lifelong principle – Spend Less Than You Earn
THIRD, OPEN A CUSTODIAL BROKERAGE ACCOUNT
A custodial brokerage account allows minors to own investments, such as ETFs, stocks, and bonds, under the supervision of an adult custodian. They can be opened at all major financial institutions and brokerages.
To open a custodial account, an adult acts as the custodian on behalf of the minor. A brokerage account is a great chance for your child to understand investing. A great starting investment is Vanguard S&P 500 ETF- VOO. Explain the pros of this ETF (low fees and diversification by owning a small portion of 500 U.S. companies.)
Investments in a custodial brokerage account are the minor’s property, but they do not have complete control until they reach their respective state’s age of maturity (18 or 21). Teach them well!
My daughter now has 100% control of her former custodial account.
ETFs VERSUS INDIVIDUAL STOCKS
If you are good at picking stocks and understand how to do your research, you can use this account over the years to teach your child how to pick stocks. Maybe you leave 80-90% in the S&P 500 ETF and 20-10 % used for individual stocks. If your son likes Nike shoes, research Nike stock and decide if this is a good investment. Maybe your daughter likes shopping at Five Below Stores. Help her research and investigate if this is an excellent stock to buy. Have some fun while learning!
THE MAGIC OF COMPOUNDING
A quiz for your kids. Offer them a theoretical choice. They can have $10,000.00 today, or for the next 30 days, they get one penny, and each day you double the amount until the 30th day. Example: On Day one, they get one cent; on Day 2, two cents; on Day three, four cents, etc.
Answer: If you start with one penny and double the amount each day, at the end of 30 days, you have $10,737,418.23! WOW!! This demonstrates the magic of compounding. {Go ahead and do the math. I know you want to.}
When you put your money in a bank account, the bank pays interest on your money. Compound Interest is like a reward for letting them use your money. And if you leave that interest in your account, the bank pays you even more interest on top of the interest!
You have $100.00 in your bank, and the bank pays you 10% interest every year. After the first year, you would have $110.00 because you earned $10.00 in interest. In the second year, you will make 10% interest on $110.00, so your interest in now making money. Year after year, your money grows faster and faster. That’s the magic of compounding!
A LIFETIME IMPACT!
I found it challenging to get my daughter interested in investing. You grow their interest by using tools and methods the individual; can relate to. They ARE NOT A MINI YOU!
Nobody knows your kids better than you!! A slight effort on your part can pay off tremendously for your child and have a lifetime, hopefully, legacy impact.
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LET’S MAKE SOME MONEY – CRYPTOCURRENCY, ANYONE?
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YOUR GREATNESS IS NOT WHAT YOU HAVE; IT’S WHAT YOU GIVE! – SOME CHARITIES I SUPPORT
St Jude Hospital: The mission of St. Jude Children’s Research Hospital is to advance cures and means of prevention for pediatric catastrophic diseases through research and treatment. Consistent with the vision of our founder Danny Thomas, no child is denied treatment based on race, religion, or a family’s ability to pay.https://www.stjude.org/
Wounded Warrior Project: An American charity and veterans service organization that offers a variety of programs, services and events for wounded veterans of the military https://www.woundedwarriorproject.org
Folds of Honor: Providing life-changing scholarships to the spouses and children of America’s fallen or disabled military. And now, our mission expands to the families of America’s first responders. On our watch, those who protect our freedoms and our families will know they are not forgotten. https://foldsofhonor.org
Wilson’s No-Kill Animal Shelter: A N0-Kill shelter that is a top-rated non-profit. They compassionately care for all their animals. https://wcnkas.org
Tunnel To Towers: Since 9/11, we have been helping America’s heroes by providing mortgage-free homes to Gold Star and fallen first responder families with young children and by building specially-adapted smart homes for catastrophically injured veterans and first responders. We are also committed to eradicating veteran homelessness and helping America to Never Forget September 11, 2001. https://dogood.t2t.org/give/320847/#!/donation/checkout
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ABOUT ME
I am a proud nerd (as my beautiful wife and daughter have told me) investment and finance blogger with an NC. State, Chemical Engineering, University Rutgers, MBA and Harvard University, Advanced Management education.
I left a corporate career because I desired to make a difference as a speaker and writer. I was blessed to be coached and mentored by strong women and men in my family and professional life. It is my time to serve and give back.
DISCLAIMER
I started my first business at ~13 years of age (a small but brilliantly created plant nursery). I am a successful investor in stocks, options, and real estate and am happy to share my finance and investment lessons. I am NOT a licensed financial advisor. Please do not construe my suggestions on this blog as recommendations for your situation. As an investor, you must establish your risk/loss tolerance. Investment in any asset involves risk, including complete loss.
Please seek your licensed CPA or fiduciary financial advisors for individual financial advice.
I write this weekly blog to make an impact by reaching an audience and demonstrating the need for financial literacy. I will help you get there.
