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  • Writer's pictureJoel Hyde

Kids and Money

Updated: Sep 16, 2023

Giving our kids a solid understanding of how money works is invaluable. Research has shown that most of our money habits are developed while we’re children. The three most important things we can teach our kids are:

• Understand Digital Money • The Power of Budgeting • Learn to Invest

Digital money can seem magical. The earlier we can teach our kids to understand money in its digital form, the better. 13 is a good age to begin in earnest. This goal can be achieved by getting kids immersed in digital money.

1. Set up an online checking and savings account for kids they can access online. Typically, banks allow kids to open accounts for minors once they have reached the age of thirteen as long as a parent or legal guardian signs as a co-owner of the account. 2. Allow them to use a debit card. Require them to track their purchases and income on a spreadsheet, categorizing each line item. Allow some room for error in this process. Sometimes, debit cards will be declined, or numbers won’t balance. These are excellent opportunities to have conversations. 3. Meet with your child at least once a week to go over their spending and tracking to see if their accounts balance.

When kids get paid, have them deposit a percentage of their income into their savings account. Help them create a spreadsheet that tracks and labels what the money is being saved for. One reason savings is so hard for kids is that they don’t know or have control over what the money will be used for. Seeing interest payments and labeling this “free money” is an excellent teacher.

There are a few ways to get kids involved with investing. A good way to encourage them to learn about investing is by letting them play a stock market game. Many different websites and apps can be used; the SIFMA Foundation has a great version.

A real-world option is to open a Uniform Gifts to Minors Act or Uniform Transfers to Minors Act (UGMA/UTMA) account. These are custodial accounts that can be opened in a minor’s name. These accounts allow kids and parents to save money and invest while giving parents control over the account until the child reaches majority age.

Another option is to open a Youth Account like the one offered by Fidelity. This account will teach kids to invest money and see the associated risks and rewards.

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