Setting Your Kids Up For Financial Success

It is always a smart idea to teach your kids about saving and investing as early as possible. You want to ensure that your child has plenty of money to live out their dreams and one day be able to retire. You give your child the greatest chance at financial success by starting them off while they are still young.

In the past, people could rely on Social Security and pensions to get them through retirement. Now, facing rising inflation, a job market that no longer offers pensions and a Social Security system on the verge of bankruptcy, people know they must initiate their retirement planning much sooner than ever before. Helping your children begin a life of saving and investing for their future is something every parent must do. It is pretty easy if your use the following tips to execute a smart financial plan for your child.

How To Set Kids Your Kids Up For Financial Success

  • * Start a mutual fund for your child(ren). After the initial investment most mutual funds will allow you to contribute as little as $25 dollars each time you make a deposit. Encourage friends and relatives to make contributions to your child’s investments in lieu of material gifts. Require your children to invest a percentage of any gift money they receive. Have them place 20 percent of all gift money in a mutual fund or exchange traded fund.
  • * Reduce the amount of money that is used to purchase gifts during the holidays. By investing half the amount you would spend on toys that are soon forgotten. you will be able to amass a substantial retirement account for your children. It is better to have stock in Nike than a pair of Nike sneakers that will be outgrown in a few months. The stock will last for decades.
  • * Make deposits automatically. When you have deposits automatically withdrawn from your bank accounts it is easier to manage your money.
  • *Teach your children to live beneath their means. This is crucial for saving for your and your child’ s futures. You do not want to cripple your child’s financial future by being dependent on them for money as you age. You also do not want to have your adult child unable to navigate the world of finance without receiving money from you. A vital lesson to learn is you cannot save anything if you spend everything.
  • * Use tax credits wisely. Every child age 17 and under receives at least a $2000 tax credit from the federal government. The tax credit has recently increased to a maximum of $3,600 per child depending upon income eligibility. Dedicate some of this credit to the mutual fund each year, regardless of any other plans you may have for your refund.
  • * Take advantage of tax deferred state plans. Many states offer tax exempt or tax deferred programs for minors.
  • * Consult with a certified financial advisor to help you with the execution your plan.
  • Have your child start reading financial books, listening to financial podcasts, and watching financial television channels. This will expose your child to qualitative financial information at an early age.

A simple investment of $100 a month over a forty year time period in a basic index fund will generate over a million dollars. If the savings begin when the child is quite small, the investment value is sure to exceed the million dollar mark well before retirement age.

By making it a habit to invest into your child’s future, they will also learn to invest. It is imperative to instill into children today that they are responsible for their future and how financial decisions today can set them up for financial success in the future.