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AuthorJeff Venables is a Christ-follower, husband, father, high school chemistry teacher, Dave Ramsey certified financial coach, runner, and blogger. |
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How to Help your Kids Win With Money10/1/2021 There are many things that you can do as a parent to set your children up for a successful financial future. Children need to learn their money habits somewhere, so I believe that parents should be the primary teachers in this area. While I am a teacher who tries my best to include some financial education in my chemistry classes, we cannot count on our schools and teachers to provide this education for every child. So, here are a few ideas to get started in this area:
1. Be a good role model, and pull back the curtain (a little). Our children learn at least as much from what we do as from what we say. Model good financial habits for your children. Stay out of debt, save and give faithfully, and pay all your bills on time. Most importantly - SPEND LESS THAN YOU EARN! And, at the appropriate times, let your children in on how you do things. They don't need to know all of the ins and outs of the budget, but it won't hurt to let them know how the budgeting and bill-paying processes are done. 2. Help them budget. The tried and true method of 3 jars (or envelopes) would be a great place to start. One is for spending, one for saving, and one for giving. Every time your child earns money (whether inside or outside the home), they should put some money in each jar. Help them figure out their spending priorities, their saving priorities, and their giving priorities. Then show them how to execute all three. 3. Establish a 529 account. a 529 account is a tax-favored savings/investment vehicle to save for your children's education (private school or college). The best way to do this is little by little over time. Start when they are born (or shortly thereafter). Do you have a teenager? Start now. The money in a 529 grows tax-free. As long as the money is used for qualified educational expenses, the withdrawals are not subject to tax. If your child does not use all of the money for education, you can change the beneficiary to another child, or withdraw the money with a penalty. 4. Help their credit score. You can add a child as an authorized user on one of your credit cards as a teenager. And, you don't have to tell them or give them a card. But, adding them this way begins to establish credit for them. When they are a little older, put their cell phone bill in their own name. Paying bills on time establishes credit as well. 5. OPEN A ROTH IRA FOR YOUR CHILDREN. As soon as your child has earned income, you can contribute to a Roth IRA in his/her name. You can open it sooner, so that it is ready for contributions when they start earning money. Why a Roth IRA? It is the best tax-advantaged account that the government has authorized. And, the longer you have money in a Roth IRA (let's say from age 15 to age 65 - that is a long time), the better the tax advantages are! All of the money in a Roth IRA is withdrawn tax-free after the age of 59 1/2. You can contribute up to 100% of your child's earned income each year or $6,000, whichever is less. You can do the same for yourself, but this post is about your kids. Certainly, there are other things that you can do, but teaching your children the right way to handle money and jump-starting their credit history and investments are a great way to set them on the path to winning with their money!
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