7 Tips for Building a Strong Financial Future for Your Children

You have a lot of responsibilities when raising children, and teaching them about finances is one of them. Schools do a great job of teaching the hard stuff, but very few educate our children about personal finances. Gaining knowledge and experience with personal finance is a life skill that all kids and young adults need.

It might seem overwhelming to teach kids about finances but know that they see more than they hear. Their personal finance knowledge will start with your habits, and then you can build from there.

If you're wondering where you should start building a solid financial future for your children, try these 7 tips.

1. For A Strong Financial Future For Your Children, Talk about Money in Age-Appropriate Ways

Don’t make money conversations taboo in your house. You should instead talk about money freely and consider introducing them to money when they are young. You can even talk about money with toddlers. Play simple games like pretend store and use pretend money. Count the change (even if it's incorrect), and show young kids that money is a normal part of life.

As your kids age, you can talk about money differently. You can share your own personal finance stories and help them make smart money decisions. Including your children in family money conversations can be an effective way to introduce them to day-to-day personal finance decisions, goals, and challenges.

2. Let Kids Help You When Shopping

When shopping, talk to your kids about your decisions, such as using one product over another or using coupons.

As your kids get older, give them a budget for something like groceries and let them figure out how to manage the funds. They'll quickly learn to budget for what they want and save on other items. This may help to control impulse buying and help kids make budgeting and saving a regular part of their lives.

3. Make Kids Work for Money

Allowance has become a 'normal' part of parenting. You may consider not paying allowance for the typical house chores, like making their bed, cleaning their room, or helping with the dishes. Instead, make kids earn their money by paying for extra work or things you don't expect on a daily basis.

This will help them build a work ethic and understand that hard work pays off. Just handing your children money doesn’t teach them any valuable lesson.

4. Open a Savings or Checking Account for your Child

Open a savings or checking account for your child as early as possible. Even before they can understand they have an account.

As your child gets older, let them handle the account. This is the best way to teach in real-life how to handle money. Your child can make deposits, budget, and save for things they want. Instead of handing them everything they want, make them work for it and earn it. They'll learn the difference between needs and wants quickly and be better prepared to make significant financial decisions as they age.

5. Teach the Save, Spend, Give Tactic

When your child is old enough to earn money or receives money as gifts, help them understand the save, spend, gift model.

You can choose any percentages, but for example:

· Save 30% of the amount earned or given

· Donate 20% of the amount earned or given

· Spend 50% of the amount earned or given

This provides your child with boundaries but lets them make decisions and feel independent. Your child can use jars to see the amounts that add up in save and give and even spend if there is something specific that they are saving for.

6. Add your Child as an Authorized User

When your child is a pre-teen or teen, and you feel they are responsible, consider making them an authorized user on your credit card.

You don’t have to give them access to the credit card yet, but having them as an authorized user helps them build credit early. Paying your credit cards on time and using them responsibly will help your child build a positive credit history. A positive credit history can give your child the chance to be eligible for more preferential rates as they get older.

7. Help Kids Save for Retirement

When your kids earn money, they can open an IRA, but you must be the custodian. The earlier you open a retirement account for them, the more time the earnings have the chance to compound and grow.

The best part about this is kids can earn money in any way, including mowing lawns or babysitting. They don't need a W-2 position to have an IRA. As long as you claim their income, they can have an IRA.

If they need the funds for college or to buy a house, they may be able to withdraw at least some of the funds without penalty. Otherwise, the money will sit there until retirement, setting them up early in life.

Final Thoughts

Helping kids have a bright financial future is a big job for parents. The key is to make money a natural part of their lives. Hiding money conversations or waiting until they are ‘old enough’ is a big mistake.

Instead, teach kids about money from the moment they can talk. Make money a natural part of life, including saving and giving. Let kids learn how to earn money, make important decisions, and use it.

The more independence kids are provided early in life, the easier it is for them to have a solid financial future. Making money 'secretive' or seeming like a problem can make kids grow up with bad money stories and make bad money decisions, don't let that happen to you! Work with your children to build a strong financial future to help them grow and be financially independent.

If you would like to schedule a complimentary consultation with a financial advisor, click the link below to see how we may be able to help you and your family work towards your financial goals. We may be able to show you ways for you and your family to build a strong financial future together!

HunterRIDGE Wealth Management is Long Island's premier wealth management firm. From growing wealth to planning for retirement, we are with you every step of the way. To learn more about how we work with our clients and our planning process click here. 

For educational purposes only. Not to be relied upon as financial, tax, or legal advice. 

This information was obtained from sources believed to be reliable, we do not guarantee its accuracy, completeness, or fairness. We have relied upon and assumed without independent verification the accuracy of all information available from public sources.