If you want your children to be financially educated, you will need to teach them all aspects and types of finances, the essence of savings, creating a good investment plan, and how to manage money via a kid debit card. We are going to discuss four savings and investment plans for your child’s future.
Don’t be fooled to think that if the kids are small that they can’t master some things concerning money because children are aware of the existence of money from the age of three. Experts consider if you start teaching children as soon as possible about finances, managing money, and creating proper financial stability, the children will adopt it and it will become a habit and later a commendable skill.
How do you get the money?
Before you start teaching about finances, you will have to explain to the children how money is made and how to get it. The only way to earn money is through hard work, money is not in abundance and should be treated with respect. Money does not come from magic machines (ATMs), nor does it grow on magic trees as many children think.
Money is spent very quickly if you do not take care of expenses. It is very important to teach children the difference between needs that are mandatory to spend money and desires that are not necessary and sometimes you can fulfill them according to your possibilities.
1. Get them a kid’s credit card
The easiest and most comprehensive way to learn all aspects of finance is to provide them with this type of card. Children have various types of options from investing in shares, creating a savings plan, earning money, making payments, donating money to the needy, and also completing tasks through activity tables.
They are also taught how to acquire the skills of performing and fulfilling obligations on time. What’s great is that everything is within one mobile app, parents and children have an insight into the activities and transactions that children perform at any time.
2. Investing in shares
Thanks to the development of technology and a variety of credit cards for children, it is possible to invest in various types of stocks within various branches of the economy. Children in agreement with their parents decide in which stocks and which branch of industry they will invest the money. At any moment, children and parents have insight into the state of the stocks, whether they are growing or falling.
We advise you that children invest gradually in various branches of industry to enrich their portfolio. Later, when children have mastered the way and types of investment, they will further explore and invest in industries they consider valuable.
3. 529 education savings plan
Many parents and children decide on this type of tool that allows them to save money for future tuition fees and all activities related to college. The 529 education plan can be activated and used in two ways, one is to buy college credits in advance that have the value of today’s price, and the other way is to gradually build a balance and invest money in the current market.
There are various exchange-traded funds that you can invest money in, and here you are exempt from paying tax on withdrawals as long as the money is used for educational expenses such as tuition, book purchases, tutoring, rent, and other educational expenses.
4. Custodial Roth IRA
This account is opened by the parents in the name of the children on the name of the child, and as guardians, they have full control over the money in the account until the moment the children reach a certain age.
Parents can activate this account for children from 10 to 18 years old, and the property must be transferred to the child when they turn 18 to 25 years old, depending on the law and the country in which you are located. Parents pay their children money into an account similar to compensation for the children’s contribution within the household, curricular and extracurricular activities, and performing some part-time jobs.
What is important is that you know that minors must not exceed the amount they earn monthly. If you end up paying more money, you will be forced to pay large fines. The earnings that the children have in the account can be withdrawn without paying tax only after the account has been open for 5 years and some of the following conditions have been met, such as the purchase of the first property, death, injury of a child, or disability.
