Building Your Child’s Future
February 2, 2021
There is never a bad time to start talking about money with your children, but you will be giving them the best chance at a financially secure future by discussing the subject with them as early as possible. We have included three helpful articles and a fun quiz from the Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC) within this post to help you initiate a conversation about money with your kids.
One of the most difficult parts of discussing money with children is determining which subjects are comprehendible based on their age. Thankfully, the CFPB takes out some of the guesswork by recommending age-appropriate money milestones for children below the age of five, age six to preteen, and teenagers to young adults, and also recommends a list of books you can read with your children based on their age. It is important to talk to children about major life decisions, such as buying a car, purchasing a home, or using a credit card so they are aware of the financial commitment associated with these major milestones.
Ideally, you and your partner should have a unified approach toward money, so you are able to provide consistent answers to the financial-related questions you receive from your kids. However, discussions about money are not always easy to initiate. The FTC offers a fun way to start that conversation with their quiz on the financial compatibility of you and your Valentine. While the responsible answer to each question is pretty obvious, the quiz will help you realize the areas in which you and your partner either agree or disagree about money.
Assisting your child in opening an individual retirement account (IRA) as a minor may be one of the most advantageous financial decisions you will ever help them make. The CFPB outlines several benefits in their article on opening an IRA after starting a part-time job. A few possible advantages of opening an IRA as a minor include the option to elect for a Roth IRA when you are in a lower tax bracket and the benefit of earning compound interest on investments at least five to ten years before you would likely start contributing to a 401k at work.
Protecting your child’s credit is arguably just as important as saving money. Oftentimes, minors do not find out about issues related to their credit until they are old enough to apply for credit. This FTC article on identity theft and fraud explains what parents can do to help protect their children. One step you can take is to request a security freeze, also known as a credit freeze, which restricts access to a child’s credit report and makes it harder for thieves to open accounts using the personal information of minors under the age of 16. It is free to freeze and unfreeze credit files with Equifax, Experian, and TransUnion, but it is important to understand the difference between a freeze and a lock, as a lock includes a monthly fee.
These are just a few of the many ways in which you can prepare your child to be financially secure and independent as an adult. The CFPB and FTC have many free resources available to help you teach your child about budgeting and financial wellness.