Your kids will most likely receive monetary gifts throughout their youth for birthdays, graduations, and other special occasions. Instead of depositing or investing the money for them, why not take these opportunities to teach your children how to manage money.
Teaching your children about money management while they are young will be of value in the future even though they may not understand the importance now.
The following excerpt from an ABM article, Turning Monetary Gifts into Learning Experiences for Children, offers suggestions on how you can help your kids save, invest, and manage their money.
Open an account under your juvenile children’s names, deposit funds as appropriate, and then let the children manage their own accounts. Managing these accounts is a great way to teach budgeting skills, balancing a checkbook, and saving for a rainy day.
Paying for college is something that most parents want to do for their children, so why not turn it into a learning experience? With a 529 plan, you put away money over time in investments to help fund an education. These plans, run by states, are typically flexible, low maintenance, and offer a variety of state and federal tax benefits. You can use a 529 plan to teach younger children about saving, and you can gradually bring them in on the investment selection process as they get older.
Open a Roth individual retirement account (IRA) for your kid’s retirement. While it might be tough to convince a teenager to invest part of his or her paycheck, it isn’t required that IRA contributions have to come from your child’s earnings. As long as your child has earned income, you can make the contribution for them up to the maximum they are eligible to contribute. This is a great way for kids to learn about investing and will give them a significant head start on their retirement.
Give money through a custodial account. If you don’t want to dedicate gifts toward a specific goal like college or retirement, then a Uniform Gift to Minors Act or Uniform Transfer to Minors Act custodial account is a great option. These accounts allow you to give minors monetary gifts that are tax-free up to $13,000 per year. They are available at most financial institutions and allow the custodian, usually a parent, to maintain control of the assets until the child is old enough to take custody of them.
Teach your Children How to Manage Money – Begin your investment planning today
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