As parents, we only want what’s best for our children. We want to see them become successful. We want to see them thrive and be financially stable. We want them not only to save but learn to invest and grow their money as well.
But, the question many parents ask is how?
We all know that schools don’t teach financial literacy. But as parents, it is our responsibility to teach our kids how to save and invest. Here are some tips on preparing and starting your kid to save and invest.
When Can My Kid Start Investing?
There’s no right or perfect age for a kid to start learning to save or invest. The earlier, the better. If you start now, your kid could develop good money habits early on and get good at it. They will also have the time to see and appreciate their money grow.
Start an investment account for your kid now and let them watch it grow. They may not understand it yet, but there will come a time that they will appreciate it and appreciate it. They will understand the value of saving and investing their money.
Starting Them Young
The most common question parents ask is, “When is the best time to get my kid into investing?”
We should start our kids in handling finances as early as possible. You can begin as early as three years old. Children can see and experience saving and managing the money you give them. They can experience being financially responsible at a young age.
Giving your kid a piggy bank is an excellent way to teach kids about savings. A kid can learn how to save whatever money they have left and keep it in their piggy bank. Your kid can learn how to be frugal early on.
As parents, we must equip our children with good financial habits. We must prepare them for adulthood. Imagine if your kid knows how to save and invest by the time they’re in their early 20’s. Don’t expect them to be millionaires, but they would have developed good money habits.
Teaching the Difference Between Saving and Investing
Saving is a great skill for kids to learn. But, we must also teach them the difference between saving and investing. They must understand that they should invest if they want to grow their money. Teach them not to put all their eggs in one basket early on. Let them understand the risk and rewards of investing. By the time they invest on their own, they will be comfortable and know what they’re doing.
Best Way to Teach Your Kid about Finances
If you’re teaching your kid on finances, you should ease up on technical terms like mutual funds and bonds. Instead, explain it in simpler terms, like bonds are like loans to a company. Mutual funds are like money from many people used to buy a piece of a company.
Speak your kid’s language when you try to teach and explain to them about finances. You can use stories like Aesop’s The Ant and the Grasshopper story. You could also use visual aids like lego blocks. Another good way to teach finances is through games. Board games like Monopoly and The Game of Life are great and fun ways to teach kids about finances.
Setting Up an Account with Your Kid
Now that you taught your kid about saving and investing, they’re now ready for the real thing. You can now open a custodial account for your kid. Custodial accounts are financial accounts initiated and managed by the parent for their kid.
These are real accounts that will be transferred to your kid once they reach a certain age. Having a custodial account for your kid gives them freedom and a sense of responsibility. They can be in charge of finances that someday can be theirs.
Choosing the Right Bank for Your Kid
Now that you’re set to start an account for your kid, it is crucial to choose the right bank for you. There are different factors to consider in choosing. Here are some tips on how to choose the right bank.
One thing to know about custodial accounts is that once you put money in them, it doesn’t belong to you anymore. It belongs to your kid. You can only manage and invest the money for your child.
Initial Deposit Requirement
Banks have different initial deposit requirements when opening an account. Check if you’re comfortable with the bank’s requirements. Check if the account serves you and your kid’s needs.
When choosing a branch for your kid’s bank, choose a convenient or nearby location. Your kid might want to deposit or transact on their bank account. A location near your home would make things easy for your kid. You could also choose your own bank so that if you visit your bank, your kid could go along as well.
Your kid’s account can be legally transferred either at 18 or 21, depending on the bank. Once the account is transferred, you lose control of the account. Your kid can do anything with their money.
Fees and Interest Rates
Look for an account with less or no maintenance fees and inactivity penalties. Also, look for banks with great interest rates. It will be easier to teach kids about interest if they see their actual account earn interest.
As parents, we all want what’s best for our children. We want them to succeed in life and be financially stable. We want to teach them the value of money and grow it. And the best way to do that is to teach our kids and support them through their financial journey.
Check and see all the tips we gave to ensure you got the best options for your kid. Check all the banks and institutions. Check nearby locations for and their interest rates and penalties. Eventually, teach them as well the importance of getting a loan only from a licensed cashmart lender like a lucky plaza money lender to build their credit score.
Start them young in financial literacy. Teach them continuously until the time their account gets transferred to them. Do this, and your kid will surely be ready and be thankful to you when the time comes.