Teaching Kids About Money: A Must-Have Life Skill

While most U.S. adults believe parents are responsible for teaching their children about money, a significant number of parents never discuss finances with their kids. This can have a lasting impact on their financial well-being, as financial literacy is crucial for making smart decisions and building a secure future.

• A survey by CNBC and Acorns revealed that 31% of American parents never talk to their kids about money.
• Social media star Kat Stickler, who grew up in a household where money was never discussed, emphasizes the importance of open communication about finances.

Start Early and Make It a Habit

Experts like Matt Stucky, Vice President and Chief Portfolio Manager at Northwestern Mutual, advocate for starting early and incorporating financial discussions into daily life. It’s about building good habits, just like any other life skill.

• Parents can start with simple concepts, like saving and spending, even with young children.
• Explaining the value of a dollar, the difference between needs and wants, and the importance of saving for future goals can make a big impact.

Lead by Example: Setting the Stage for Financial Success

Parents can also set a positive example by demonstrating good financial habits themselves. This includes making responsible spending decisions, budgeting, saving, and investing.

• Kids learn by observing their parents, so setting a good example is crucial.
• By showing them how to manage money effectively, parents can instill valuable lessons that will benefit them throughout their lives.

Financial Planning for Kids: Securing Their Future

Navigating the uncertainties of life requires planning for the future, especially when it comes to children’s financial well-being. Parents can take proactive steps to secure their kids’ future by setting up financial plans and accounts.

• Creating a will with a detailed timeline, establishing healthcare and education funds, and setting aside funds for everyday expenses like clothes and toys are essential steps.

Investing in Kids' Financial Future: Building Generational Wealth

Parents can leverage various investment vehicles to secure their children’s future and build generational wealth. Some options include:

• 529 Plans: A tax-advantaged savings plan specifically for educational expenses. These plans allow parents to contribute funds for their children’s education and watch their investment grow tax-free.
• Roth IRAs: A retirement savings plan that allows contributions to grow tax-free. Parents can contribute on their child’s behalf, up to the earned income limit or the current contribution limit of $7,000. This can help build their child’s retirement nest egg and support generational wealth.
• Uniform Transfers to Minors Account (UTMA): A custodial account that allows parents to control the funds until their child reaches a certain age (18-21, depending on the state). This provides flexibility in managing the funds until the child is ready for financial responsibility.
• Permanent Life Insurance: A long-term investment that can provide both death benefit and cash value accumulation. The death benefit ensures financial security for the child in case of a parent’s passing, while the cash value can be accessed for future needs.

A Strong Foundation for Financial Success

By teaching kids about money, parents can equip them with the knowledge, skills, and habits they need to manage their finances effectively. This includes understanding the concepts of saving, investing, budgeting, and debt management.

• Investing in a child's financial education is an investment in their future success, empowering them to make informed decisions, reach their financial goals, and build a secure and prosperous life.