6 Things To Set Up Your Kids For Financial Success

6 Things To Set Up Your Kids For Financial Success

April 8, 2021
Monopoly

When you grow great behaviors and character traits in your children, you are really teaching them how to win in life.
~ Smart Money Smart Kids

Table of Contents

Pretty Ricky, Pretty Tito and Pretty Tony 

I’ve mentioned my kids on my blogs a few times. Pretty Ricky is a Junior, Pretty Tony is a sophomore and Pretty Tito is in 4th grade. Even though I am big into finances, they aren’t as passionate as me, but that’s not stopping me from doing what I know to do: to get them off on the right path with their finances. This doesn’t only include teaching them financial stuff but also practical things they can do.

So if you have kids, nieces and nephews or a young person you mentor, read until the end because you are in a position to set them up for financial success at a young age.

So our kids!!! I hear so often when talking to mothers with teenage kids…only a few more years until they turn 18 and they will be off to college. I’m excited for what the future holds for my boys and my nieces. There’s so many possibilities and opportunities if they keep their eyes open for it, like I mentioned in one of my YouTube videos.

I have high hopes and dreams for my boys but at the end of the day, it’s their life. I want them to make decisions that they are comfortable with and that they will be happy with. So maybe that’s college, trade school, missionary work, real estate or starting their own business.

No matter what this is, what is the one thing all these things have in common? MONEY! So ask yourself, this question…. are your kids ready to be on their own at 18? Will they be able to manage their money, so they aren’t 40 and still living with you? That’s why I have been working on them since they were about ten to understand money, how it works and how to make it work for them.

Custodial Account

One of the first things I did when I started to get my finances in order was open up a Custodial Account for them. Back then I didn’t know much about 401Ks, ROTH IRAs, Custodial accounts, 529 plans but I knew I wanted to start saving for them to have something once they were 18.

I ended up going with a custodial account because they can use the money for anything once they turn 18. I wasn’t sure if they would go to college and I didn’t want them to be forced to go so I went with the custodial account.

Some people call a custodial account a Cancun account because there’s been so many stories of the kids taking the money out as soon as they could and spending it all on vacation. You know your kids and your kids know you.

My kids know that we have a nice amount of money that they will have access to soon but they already know what that money is intended for. Oh…we already had that conversation. I started to instill that fear early in them. I don’t care that both of you outweigh me and are taller than me. They know I don’t play when it comes to my money and I’ve been taking kickboxing for the last 3 years. They can try me if they want. I’m kidding, really I’m kidding.

Child with pig

The only thing I will say about this, is do not start saving for your kid’s college before setting money aside for your retirement. You can’t take care of other people if you aren’t taking care of yourself first. This might seem selfish to some people and that’s ok. I am going to continue to do me. I see it as financial wisdom. You can’t pour from an empty cup. Take care of yourself first.  

Checking and Savings Accounts 

With my two youngest, they were about 10 when I opened up their own checking and savings accounts and my youngest one is 9 and he already has accounts as well. When they were younger, they had their little piggy banks but that’s not how the world works now, cause let’s be honest who uses cash anymore. Most places don’t even accept cash.

That’s why I got them a debit card so they could get used to swiping that card. Managing your money is a lot harder when using a card. You have no sense of how much you have left, unless you are checking the account online on a consistent basis.

I remind them to check their bank account balance every few days and they have caught a few things that they got overcharged for or double charged for. They worked last summer and Pretty Ricky has a job now so they both have some money. They each pay for their own gym membership, gas, video games and if they want takeout that I haven’t budgeted for, they pay for it.

Some people don’t agree with this but I want my kids to be independent not co-dependent. They are learning how to budget while they are at home instead of when they are on their own. This is setting them up for success.

Authorized Users

Last year, I started thinking, “What can I do to start to build their credit?” because it’s so important. That way when they turn 18, they can already have credit history. Everything revolves around credit. (I have two full videos on credit so if you need practical ways to improve your score, go to my YouTube page and check those videos out.) One way you can help them with their credit is to make them authorized users on your credit cards. Not all credit cards let you but one of mine did, so I added them to that account.

It’s funny because one of my kids actually thought I was going to give them the credit card and they were going to be able to use them. Umm no. .

This is common sense but I feel like I have to say it. Don’t add them to your credit cards if your credit or your finances aren’t in good shape. If there is a possibility that you are going to run up a high credit on that card or miss payments, this tip is not for you. Just keep working on your finances and once you are in a great place, and then add them to one of your credit cards.  

One more thing I will do once they turn 18 is have them open up a credit card and use it on their behalf to pay for monthly expenses like I do now. That way, they will have a consistent history of on time payments and managing their credit.

Pay Themselves First

Before they got their first job, the boys already knew about the concept of pay yourself first. When they get paid, they move 20% into the next account I am going to talk about to invest in the stock market. They don’t keep too much money in their savings because if you have your money in a savings account that is only offering you .01% and inflation is about 2% per year, you are losing money. That means that every dollar you have in there will be worth about 98 cents in a year because of inflation.

At first, they were not happy about having to take 20% of their paycheck because they are still young and aren’t thinking long-term. But I made that mistake when I was young and as long as I can help it, they will continue to pay themselves first.

ROTH IRA for KIDS

At the end of last year, I opened up a ROTH IRA FOR KIDS account through Fidelity. You might be thinking, “another account?” Well, the custodian account I talked about earlier, they can use for their education, to assist with buying a car or to start-up a business. The checking account is for check deposits and to use on a daily basis, the savings account is to separate the money that is for other things and the ROTH IRA is for retirement. Yep, they started to save for retirement at 15. Let’s see if they will continue it after they leave the house.

They can’t contribute more than $6,000 a year, which is the case for all ROTH IRAs and they can’t contribute more than the amount that they make in a year. So they have to have a job that they pay taxes on.

I didn’t open up a ROTH IRA until I was 27, and I know that the sooner you start saving, the more you will have in your retirement account. Also it will be less of your money and more of the money that you have made in the market.

Stocks

Lastly, once they have the money in their ROTH IRA, now they have to figure out where they are going to invest it. Individual stocks, mutual funds, index funds, ETFs, there are a lot of choices. Since they just started with the ROTH IRA, they don’t have too much money in there. But they have taken about $100 and invested in individual stocks of their choice. This gets them wanting to learn about investing because they get to decide the company and it will be something they are interested in.

I know they aren’t going to get rich with a $100 investment but it’s really about them understanding the stock market. I know no one wants to lose money but if they do lose $100, they are young, have no bills and are still living at home. The $100 is worth them learning and getting experience.  They know how to look up a stock’s price and where to go to look it up, have a basic understanding of the graphs that you see when they talk about stocks. So basic stuff, but more than most people know. The rest I invest in index funds.

Don’t Stop There

So there you have it, these are some of the financial things that we’ve been doing with our older kids. Next thing I am looking into is cryptocurrency, most people know it as Bitcoin. I have invested a small amount so I can get familiar with the app. I still have a lot of research to do but once I feel confident that I know enough about it, that is the next thing I will be teaching them. Last thing I will say is start involving and exposing your kids to finances early in life so that when they are 18, if it’s time to go…its time to go. I’m kidding, I’m kidding…I love my kids.

To Your Finances,

Ana G
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Ana G.

Ana G.

Wife, Mother, Soldier, Self-Development Coach, Entrepreneur, Philanthropist

Ana G.

Ana G.

Wife, Mother, Soldier, Self-Development Coach, Entrepreneur, Philanthropist

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