You’ve got them started on the right foot; they’re putting away money and following your example, but what’s next for your kids’ savings? As they grow up, they need to start understanding more about financial saving and personal money management. This is the time to start introducing the practicalities of a mature savings plan. These are basic lessons that might not be as intuitive but will serve your children for the rest of their lives.
While these are points of conversation to have with your family, I think you’ll find much of it is advice that is applicable to your own savings. This is no accident, these are things that adults should, but too often don’t, know about how to handle their savings. Even if you can just get a few of these points across, your family and your children will be better off for your effort. If you haven’t already, be sure to check out my previous post on this subject before diving into this one.
Schedule Meetings – Make time to talk about problems and progress in your children’s finances. This is a smart way to check in and suggest any necessary changes. You can be a great resource as you invest in their financial wellness.
Budgeting – Have them write out their expenses from the past month or two and help them set up a budget. Just having this written out in front of them can make it so much easier to get a handle on their spending. For the more financially or technologically savvy, there is some good software to help with this.
Move to Other Savings and Investment Vehicles – If they have established a solid emergency fund, it may be time to move on to slightly more advanced methods and concepts. Introduce your kids to investment accounts. Help them buy a share of stock or a diversified mutual fund. Talk to them about setting up a retirement savings account. Retirement may seem a million miles away, but that is the best time to get started. The time value of money is a powerful concept to learn.
Talk About Tomorrow’s Needs – What they are putting away at fifteen is not necessarily what they should be saving at twenty. As we get older, our financial responsibilities and requirement grow. Teach your children that their emergency savings will need to grow to keep up with what three to six months’ worth of expenses might be for a sixteen, eighteen, twenty, or twenty-five-year-old.
Save Tax Refunds – Ingrain a habit of setting aside these refunds for savings. This is something they can hopefully learn from watching you. Better yet, help them understand that a tax refund actually represents an interest free loan to the government for a whole year. Not necessarily a good thing. Help them learn how to modify withholding to help reduce the size of refunds and put more in their pocket during the year.
A strong financial foundation will help your kids embark on a path toward financial peace of mind that so many adults wish they had. Give your children the gift of financial literacy, it will help them for the rest of their lives. You can also watch my video for further information on teaching kids about saving: https://www.youtube.com/watch?v=Z5J3USyGf7o
You should see a lot here that you already know or already do for your own savings. If you have questions about your savings and investments, consider seeking out a qualified professional like a CFP® to give you guidance tailored to your individual situation.
The opinions expressed in this commentary are those of the author and not necessarily the views of United Capital Financial Advisers, LLC. Certain statements contained within are forward-looking statements, including, but not limited to, predictions or indications of future events, trends, plans or objectives. Undue reliance should not be placed on such statements because, by their nature, they are subject to known and unknown risks and uncertainties. This material is not to be relied upon as a forecast, or research or investment advice regarding a particular investment or the markets in general, nor is it intended to predict or depict performance of any investment. United Capital does not warrant the accuracy or completeness of the information. The commentary is intended for information purposes only, is not a recommendation to buy or sell any securities, and should not be considered investment advice. Past performance doesn’t guarantee future results. Investing involves risk, including the possible loss of principal.