Summer School: Kids and Money

With the passing of Memorial Day and the onslaught of South Mississippi heat, we know summer has arrived, and with it, more time at home with kids and grandkids.  While they assume the teaching has stopped for a couple months, I would suggest there’s no better time to introduce to them a few lessons of financial literacy.  It’s one of the more common questions we get when interacting with parents… “When should we start to educate our children about finances?”   And “how can we do it in a way that’s easy to understand?” 


One of the most important lessons you can teach at an early age is the importance of earning money through hard work.  Help them to grasp the importance of hard work by rewarding them for a job well done.  Avoid the obligatory allowance, and instead introduce a reward for chores and responsibilities.  Even your younger children can benefit from those early lessons, understanding that hard work pays!


Talk to your kids about the things you wish you had known more about before entering the real world-- things like debt, savings, budgeting, and investing.  In a recent study by Nitro in which they studied 1,000 millennials, an astonishing 84% felt high school did not prepare them for handling personal finances.  Don’t wait until your children or grandchildren are late into their high school or college years to introduce concepts of financial literacy.  Start early and reinforce it as they continue to move through school.  There are even some apps that help teach various financial concepts.  Kiddie Kredit teaches the basics of credit while RoosterMoney allows kids to keep track of allowance by categorizing what they will spend, save, give, etc.  


Perhaps one of the best ways to teach your children about money is by taking steps to understand personal finance with them.  Open a savings account with them at a local bank or credit union.  Open a 529 account on their behalf and talk to them about investment options.  Let them see the statements monthly or quarterly.  How does the rate of return for the savings account compare to the 529 account?  This type of transparency goes a long way to teaching them about asset allocation and risk. 


Don’t let money be a taboo topic within your household.  Creating a healthy relationship between your kids and money can go a long way to helping them succeed in life, and just maybe can make those long, hot summer days go by a little quicker. 


Opinions expressed are those of the author and are not necessarily those of Raymond James.  All opinions are as of this date and are subject to change without notice.  Investing involves risk and investors may incur a profit or loss.  Diversification and asset allocation do not ensure a profit or protect against a loss. Rules and laws governing 529 plans are varied and subject to change. As with other investments, there are generally fees and expenses associated with participation in a 529 plan. There is also a risk that these plans may lose money or not perform well enough to cover college costs as anticipated. Most states offer their own 529 programs, which may provide advantages and benefits exclusively for their residents. Investors should consider, before investing, whether the investor’s or the designated beneficiary’s home state offers any tax or other benefits that are only available for investment in such state’s 529 college savings plan. Such benefits include financial aid, scholarship funds, and protection from creditors. The tax implications can vary significantly from state to state.