With student debt soaring past 1.5 trillion dollars, it isn’t getting any easier for Generation Y and Generation Z to get up and going financially in this world. Unemployment is now sitting under four percent and wage growth is barely rising at the pace of overall inflation. This means that as parents, we need to do everything we can early on in our children’s lives or even as they get close to graduating college to set them up for long term financial success. It is important we teach them the concepts and practices that can help them become more financially self-sufficient down the road. Here are five ways you can help raise a financially successful child.
1. Start Saving for College Tax-Free
- The average student will amass more than $30,000 of student debt in college, so doing everything we can to help them avoid having that debt is important. Remember, do not sacrifice your retirement for your children’s college education but do what you can to help reduce the overall burden of debt.
- A 529 plan can now be used for K-12 (up to $10k per year) and college and graduate school as well. These funds can be used for room, tuition, board, and fees.
- You never pay tax on the earnings if used for school. This account allows you grow your savings tax-deferred and remove monies tax free.
2. Make Them Learn to Earn
- Don’t give your child an allowance. Down the road when they have to look for a job, there will be no employer that will be giving salary handouts to your child. It is an extremely important lesson that will help them build better financial behaviors for their future.
- Instead of giving them an allowance, treat the rewards you give them relative to the results. Whether the allowance based on chores like taking out the garbage or making their bed, or they are based on good grades the allowance needs to be earned. When your children work in the real world, sometimes when they don’t hit their goals, they won’t even earn a dollar worth of a bonus. Don’t give in when they get close.
3. Start the Stock Buying Habit
- Many adults today still don’t understand the rules of risk and reward when it comes to stock investing, so get your child started with buying stocks early to help them become more financially successful.
- One of the key tenants here is to not only teach your child how to make money, but also teaching them what it feels like to lose money. These emotional behaviors are as important to learn as the financial behaviors themselves.
- There are great apps including Robin Hood and Acorns which can help children get started buying stocks or funds at an early age.
4. Target Savings And Budget Goals
- With apps such as Venmo and the increased use of credit cards for day to day and online purchases, the lack of educating your kids on budgeting and saving can really decrease their chances of being financially successful.
- Money doesn’t appear out of thin air. You need to teach your children early and often what it looks like to budget, save, and target a financial goal.
- Bankaroo – a virtual bank for kids is one of the best and easiest apps to help your children learn how to budget and save for a goal.
- If that doesn’t work, consider using a good old change jar to reach a $20, $50, or $100 goal.
5. Reserve their own Website Now
- One of the cool ways to teach your children about the internet is to buy them a piece of ‘virtual dirt’ instead of actual real estate.
- This would come in the form of buying a domain name. You never know if your child will be a famous movie star, athlete, or even a Supreme Court nominee. Recently, we learned that Brett Kavanaugh did not own his actual name for a website. Even the famous Bruce Springsteen is a .net instead of a .com with his own URL on the internet. You may even consider placeholding different handles on social media platforms and e-mail names.
- These are relatively cheap to earmark for your children at $10 to $20 a year.
- Some domain names have sold for well in excess of $10,000,000.
If you want bring your kids in to teach them some financial concepts or lessons, please just reach out to email@example.com and we will get them started.
Ted Jenkin, CFP®, AAMS®, AWMA®, CRPC®, CMFC®, CRPS®
CEO and Founder oXYGen Financial, Inc.
Ted Jenkin is a frequent guest columnist for the Wall Street Journal and Headline News Weekend Express. He is the co-CEO of oXYGen Financial. You can follow him on LinkedIn @ www.linkedin.com/in/theceoadvisor or on Twitter @tedjenkin.
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. oXYGen Financial is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice.
The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.