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Kids and money

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A few weeks ago, Kyle from our office contributed an article called “I Work to Pay for Disney.” We received a lot of feedback on the article because so many parents struggle with teaching their kids about money. We all have a sense of what they need to know, but it is the specifics and ages that can be a challenge for us. Last week I was asked to give a presentation to the Upper Township fifth-grade class on financial literacy so I thought this week I would share the discussion topics that might help you have conversations about money with your own kids.

1. What is money and where does it come from? Start with the most basic idea. Kids rarely understand where money even comes from. Both its creation (Federal Reserve/Mint) to the way in which we earn it is a great place to start.

2. Budget. Many of us adults struggle with budgeting so you can imagine the challenge for kids. If they only have a certain amount of money, they will need to learn how to break it out into needs vs. wants. Kids, like some adults, think everything is a need (no Cooper, Pokémon cards aren’t required for survival). Teach them that this like electric, gas, food, etc. are all needs vs. going out to dinner, new clothes and “stuff” are all just wants.

3. Spend/Save/Share. In our house, we have our kids break up all of their money into 3 categories. The first is money that they can spend on whatever they want which is equal to 30% of whatever they have. The next is the portion that they save. They are required to save 40% of their money which is broken down into 20% short term and 20% long term. The last 30% is to share. This means that they can donate it or use it to help others in some way. We feel it’s important to develop the habit of giving back to others at a young age so it will hopefully carry with them throughout their lives.

4. Credit. I don’t think we put enough emphasis on teaching kids about the importance of good credit. Having good credit can allow you to have a lot more money to put towards savings and investing. Credit affects your car payment, mortgage payment, insurance costs, credit card interest rates, etc. The savings from those few things alone could translate to hundreds if not thousands of dollars that could be used to increase your savings rates.

5. Debt management. While good credit can help lower your rates on things like credit cards, not having a balance on them to worry about the interest rate is even better. Teach them the difference between good debt, like a mortgage, and bad debt like a credit card.

6. Insurance. It amazes me how many people I meet are under insured in almost every area of their lives. I get it, nobody wants to pay for insurance, but one underinsured loss can have devastating consequences to your finances. Make sure your life, disability, homeowners, car, umbrella policies are all where they should be. Ask your agent for a complete review of all your policies to make sure you’re on track yourself.

7. Investing. We hear a lot of talk about the growing wealth gap in America. The reality we should expect that gap to continue to widen because of the way it is typically created, which is through investments. Kids need to know the importance of investing at a very young age because their savings and investments will provide them with far more money than their earnings from work ever could. I have plenty of clients who never earned a lot of money and yet are multi-millionaires because they were diligent savers and smart investors.

8. Entrepreneurship. Teach kids about having their own business. The majority of wealth in the country is held by business owners, not highly paid employees. I would be just as happy to put my kids college fund towards starting their own business as I would sending it to some university assuming they had a serious business plan, etc.

There is never really an age when it is too young to start at least a few of the conversations with kids, and the key to success like many things, is to keep doing it. We have open and ongoing conversations about money in our house, and all three of my kids have an interest in being smart with their money. I know many of you don’t like to talk about money with your kids because your own parents were taught that it isn’t something you talk about, but frankly, it’s just bad advice. The reason youth today aren’t typically good with money is because we failed to prepare them with what they need to know. If we can educate enough kids about money at a young age, we can literally change the world.

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Reich Asset Management, LLC is not affiliated with Kestra IS or Kestra AS. The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. To view form CRS visit

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