Anne-Lyse Wealth: This is the Dreamers Podcast Episode 128. Today is December 5th, 2023. Secure your own retirement, take care of yourself so that by the time you go to retirement, your kids don't have to take care of you.
That is a great way that you can help them. to be financially savvy so they understand that retirement planning is important and they understand that their responsibility also going forward is to secure their own retirement Hello, welcome to my channel. I'm Anlies Wealth and I'm so excited and thankful that you're here todayto discuss three things that parents can do to raise financially savvy kids.
So whether you're a parent, an uncle, an aunt, Or apparent to be. I think this is very valuable information.
My goal as a parent is that by the time my kids leave my house and go off to the next stage of their life, when they become adult that they have a good understanding when it comes to finances, specifically around budgeting, credit, investing taxes, and all of those things that we as adults tend to struggle with because we didn't learn them young.
So, this video is really. about encouraging you to have open conversations about money and helping the children in your life, or if you're a future parent, your future kids to become financially responsible. And it's not about doing things for them so that they can build wealth.
It's about teaching them the skills. giving them the toolkit so that they can be financially savvy and build their own wealth. because really if the emphasis is on building wealth for your, children or the, nieces and nephews, if it will likely not last forever.
But if we take the time to teach them habits that they can carry with them into adult life, then that will likely positively impact. their finances and, quality of life that they live long term. All right.
So first encourage them to earn money. So whether it's through chores, summer jobs, if you have a business and you hire your kids to work in your business, if they're entrepreneurial, some kids make lemonade, some kids, like for instance, a friend of mine, she has a twin daughter.
She makes bracelets. She helps her in her business and she's able to earn money that way. my kids, they assist in the business as well, and they are able to earn money. that way as well as, they have allowances based on some of the chores that they do around the house,
so those are some of the ways that you can encourage them to earn So that they have a sense of the value of a dollar. I think it's important that kids learn to earn money on their own, as opposed to only relying on us.
Number two things that you can do is you can help them manage their money. So if kids get money through, for birthday, holiday, if they earn money, it doesn't matter how, they get the money, as long as obviously it is. uh, legal way, right? But you can help them to manage it,
So there are so many different tools and apps that you can use now to help your kids learn about budgeting and managing their own money. one of the apps that I use all the time at home with my kids is called Greenlight and it comes with a debit card. So each of my kids, they are nine, seven, and seven, and they each have their.
Own debit cards. And also what I love about this app is that you can create tasks within the app and you can pay your kids based on those tasks. You can also, put together a reward system. so specifically like for us, we use like earn, save, goal setting. You can also use, Greenlight to actually to teach kids how to invest.
which is something that we don't do because we use different platform to help our kids invest. yeah, so it's a great app to teach kids the of budgeting and saving for big purchases. so I know for us, we use buckets in Greenlight, we have a spending bucket, we have a saving bucket.
We have different type of saving also, you know, like the kids have like a general saving. Maybe sometimes saving for a specific. Game or a specific thing that they want to do. I know like recently they wanted to buy a new game for the Nintendo switch. every week they were, saving and they put their money together and purchase the game.
there's so many different functionalities and, green light. I,
So my kids truly enjoy it because they feel like they're in control of their own money.
typically we buy toys for their birthdays and Christmas, but outside of that, unless it's like a specific reward, they typically buy their own things.
for instance, if my daughter wants to buy a present for someone, she can use her GreenLine debit card sometimes will help and contribute as well, but we also teach them, in the GreenLine app, we have a section about, given, and also we have a giving bucket so that they can save to give money away and then also a rainy day bucket.
they are really young and they keep asking me why, but I said, Hey, you might, want to do something in the future and it's good to have this. So even though as kids, they don't necessarily have like rainy days. it's good to start developing that habit.
Also, when it comes to, teaching them to manage their own money, for instance, when it comes to back to school shopping for clothes, what we do is we transfer money, into our kids account, Greenlight account, right? And, this year we went shopping for clothes.
They were in charge of their budget. And they each use their debit card to pay for their purchases at the cash register. And that's how they were able to tell whether they were, stayed within budget, whether they save money. just encouraging them to develop their own healthy financial habits.
also as you help them save, obviously you can encourage them to. Put their money in a high yield savings account, right? So, if you don't use Greenlight, but your kids are saving money in their piggy bank or something like that, you can open a high yield savings account and put money there.
But I wouldn't let it sit there too long, right? Because the high yield saving account is not going to give you a great reach on an investment. So I think the next step is
three, get them started investing. And so if, you know, earlier we talked about encouraging our kids to earn income. So if they have earned income, you can actually open a custodial rough IRA account for them. and what I love about it is that so you put money.
into the account and, as of 2023, the contribution limit is 6, 500 a year, and then whatever returns you get, on your investment or whatever they get on their investment, it will grow tax free, right? So even when they withdraw retirement, they they don't have to pay any more taxes because the money that's put into the rough IRA is already.
Taxed, right? So contributions to a rough, individual retirement account, they grow tax free and your child, can use the contributions, not the earnings, the contributions for major expenses, whether it's like, to buy a car later on or down payment for a house. is just that the account has to be, funded for a minimum of five years.
Also, , if your child has a qualified education expense, they can withdraw, earnings and contributions without paying any penalties. And of course, at retirement, the money is completely tax free, right?
So, the first step is to put money into the account, but then you have to teach them to invest it. And, an easy way to get started is low cost index funds. like a spy or VTI, you invest in the market. So you bet on the total market. And, if you have a timeframe of 10 years, 20 years, you're almost guaranteed that you'll get a return.
the average over the past 100 years plus 8 to 10%. yearly, return, so you won't necessarily get 8 percent or 10 percent every year, but that's like the average. So, just teaching them those good habits. Also, if there's like a company that they're interested in that they purchase toys from, or that they really like, whether it's Roblox or Disney, encourage them to actually also be owners of those companies.
But, to start safely, low cost index funds is probably the way to go. Also, you have UTMAs or UGMAs accounts. UTMA is, the Uniform Transfer to Minors account. And is the Uniform Gift to Minors account. And those are investment accounts that, parents can open on behalf of their kids.
But, the only thing is, when the child reaches a certain age, could be anywhere between 18 and 25, depending on the state where the account is open, they will take control of the account. But again, a UTME and UGME account is, Something that you can use to help kids invest in the same things that I mentioned earlier, low cost index funds or individual stocks, right?
so they can put some of that money that they've been saving and watch it grow and get used to seeing like returns of eight to 10 percent on average before inflation. So they can get a feel or an interest for investing. So these are three things that parents can do to help raise financially savvy kids. bonus here that I would add is secure your own retirement, take care of yourself so that by the time you go to retirement, your kids don't have to take care of you.
That is a great way that you can help them. to be financially savvy so they understand that retirement planning is important and they understand that their responsibility also going forward is to secure their own retirement
And then help the next generation build wealth. again, I'm Annelies Wealth. If you enjoyed this video, leave a comment and don't forget to hit subscribe. I would like to add that this is, not financial advice. This is for entertainment only. Make sure to always consult with a financial professional to get advice tailored to your specific situation.