Kids often know a lot more about what’s going on in the world than we realize, even if they don’t have a handle on all the details. Any child old enough to log onto YouTube has probably seen a few eyegrabbing video thumbnails or headlines about the economy in the past few weeks, or heard grown-ups grumbling about the markets, rising grocery bills, and Tax Day.
Instead of defaulting to, “You don’t have to worry about that, ” why not use your kids’ natural curiosity to spark a healthy conversation about the mechanics of the markets, individual investing, and Life-Centered Financial Planning?
Each of these activities can be scaled for an age-appropriate money lesson that could compound for years to come.
1. Review your child’s rec budget.
Many parents complain that their kids don’t really “understand” how much things cost. But have you ever actually shown your child a breakdown of their expenses?
Start small. A spreadsheet that accounts for all the camps, sports leagues, and clubs your kids will be enjoying this spring and summer — as well as costs for new clothes and equipment — can help them see that fun requires planning and investment as well. If they’re really desperate for a family trip to a bigticket theme park, price out a week’s stay and talk about how your family can start saving.
Working teens might even feel inspired to chip in a little themselves. (You can always give the money back to them at the gift shop. Or not.)
2. Open custodial accounts.
You’ve probably been depositing baby gifts and investments into custodial accounts ever since your kids were born. If you don’t want to share those balances with your kids, open another set of custodial accounts that you’ll review together monthly or (better yet) quarterly, and any time grandma writes them a check. Explain how investors who stick to their plans during market volatility often have opportunities to “buy low” on depreciated stocks that will gain in value once the markets rebound.
Make a plan for depositing a percentage of money gifts into their new account. You can track performance in a chart or spreadsheet so your child has a visual representation of what they’re contributing and how their new nest egg is growing. You could even open both savings and investment custodial accounts so that they can compare how the two perform over time.
3. Talk about taxes.
While just hearing the phrase “Tax Day” might raise your heart rate this time of year, take a breath and explain how taxes work, why we pay them, and what kinds of services they fund that your child will be
familiar with, like schools and the police and fire departments. Next time you’re shopping together, point out the sales tax charge on your receipt. Take your child with you to city hall when you make your property tax payments.
Hopefully reminding your working teen that, yes, they too have to file a tax return was part of your tax prep as well. If not, introduce them to your CPA and help them file an extension. Talk to older kids working their first full-time jobs about how their Tax Day went. Mentioning some of the tax-saving strategies you were able to execute throughout the year might help them understand the difference between prepping their taxes for April and planning a comprehensive tax strategy.
We would also be happy to help you open custodial accounts or facilitate money conversations with your children. Schedule a meeting with us today and let’s start your kids down a path of confident financial
planning.
Schedule a meeting with us today and let’s start your kids down a path of confident financial planning.
Picture of the Month
“He is a wise man who does not grieve for the things which he has not, but rejoices for those which he has.”
-Epictetus:
Securities and advisory services offered through LPL Financial, a registered investment advisor, Member FINRA/SIPC. This article was prepared for Paul Peeler’s use.