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Getting Your Kids Invested in the Markets

Getting Your Kids Invested in the Markets

When kids invest early, they avoid financial fear. By starting early, they learn that managing their finances doesn’t have to be scary. Instead, they see each portion of the financial world as a tool for them to build a better future. The best way to get them started is to open an investment account with your child and allow them to have a voice in the choices being made.

Getting Started: Types of Accounts

Once your child has spent some time learning about investing, it’s time to help them open their first account. When dealing with accounts for minors, there are two options –

  1. UGMA (Uniform Gift to Minors Act)
  2. UTMA (Uniform Transfers to Minors Act)

From an investment perspective, these accounts behave similarly. The primary difference between the two is the age at which ownership is transferred to the child. In an UTMA account, the account will be transferred at the age of 21, while in an UGMA, the child can take ownership of the account at the age of 18. These accounts can be opened at virtually all brokerage houses. The primary focus should be the platform’s ease of use and the commissions the brokerage takes on each trade.

Once you’ve established an account for your child, it’s time to deposit funds. The primary way to do this is by writing a check to the brokerage firm. Since a minor is not allowed to deposit funds into the account, the money needs to be transferred from your account.

What’s Next: Types of Investments

After funding the account, it is time to begin looking at different options in which your kid can invest. The primary three investment types are as follows –

  • ETFs
    • ETFs, or Exchange Traded Funds, are funds that allow your child to invest in the general market passively. These funds tend to be cheap as there is little happening to them, but can allow for great exposure to the markets.
  • Mutual Funds
    • Mutual Funds behave much like ETFs in the way that they allow your child to invest passively. The primary difference is that many mutual funds actively manage your money on your behalf, in the hopes of getting higher returns than the general market. Due to this active management style, mutual funds tend to come with a slightly higher management fee. Before investing in a mutual fund, identify if the fund has front-loaded or back-loaded fees. These fees are the cost to invest in the mutual fund BEYOND the annual maintenance fee. For simplicities sake, it may be best to find a no-load fund for your child’s first entrance into the market.
  • Individual Stocks
    • Individual Stocks are the highest risk option on this list. Buying into just a single company, or a mix of a few companies eliminates the diversification you are getting from investing in both ETFs and Mutual Funds. By investing this way, you are hoping that those few companies continue to do well. Investing in individual stocks is also the fastest way to get your child interested in both the markets and what makes for a good investment. By being tied to a select few companies, they become interested in checking their account regularly and follow the news cycles/financial reporting of the companies each quarter.

How Can You Help?

Remember, when kids invest, they learn to avoid big mistakes later. Getting your child their first investment account and allowing them to have a voice in the decisions made is only the first step in setting your student up for a brighter financial future. Regardless of what career path they take, they need to know that money is not a scary or taboo subject. Speak with them openly about money and highlight both the good and bad habits that you see throughout the world. Continued education is necessary for them to develop wealthy habits that will provide for them in the future.

Have questions or don’t know where to start your child’s financial education? Please take a look at the resources on our site, or sign your child up for one of our 5-day summer camps where our instructors help develop the habits that will lay the groundwork for the remainder of your child’s financial future.

 

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How to Raise Financially Empowered Kids

How to Raise Financially Empowered Kids

How to Raise Financially Empowered Kids

Guest Post By: Grant Means, Founder & Author at Start Now Press

First, let’s clear the air: nearly every aspect of raising children seems an impossibly complex challenge – no matter how much love, passion, discipline and reason we bring to the table, outcomes prove frustratingly difficult to predict. On the other hand, effective financial management represents a surprisingly simple path that we often struggle to take. For most of us, the biggest challenges are pesky distortions such as lack of confidence, tough medical issues, paralyzing emotional tug-of-war, well-funded corporate marketing budgets that nudge us to spend beyond our means, and skepticism (sometimes justified) of the financial system*. That said, there is good news!

Self-empowerment is one of the greatest gifts any parent can give their child. Parents are able to easily get ahead of the curve by engaging with their kids on several key financial foundations: instilling self-confidence, effectively managing health risks, modeling emotional grit, engaging on the issue of needs versus wants, and educating them on the nuances of banks and brokers*. Knowledge is power, so if we teach the next generation how to build a more fulfilling life, we can enable them to chart a brighter future for themselves, their communities, their country, and the world.

What You Can Teach

  • Model delayed gratification: the bedrock of financial literacy
    • If we always buy what we want, there will never be financial margin
    • It starts before kids understand money. Self-control is a necessary step
  • Instill work ethic through experience: income is our greatest wealth generating tool, so career lessons are a wise investment
    • Start now with defined commissions for chores around the house. Later on, consider dialing back an extracurricular and adding a part-time job
      • Incentivize budgeting
      • Push for a job that involves teamwork or serving people
      • Discuss how time is money – hours of work become dollars.
    • Money management cannot happen without income
  • Equip youngsters with questions to ask and tools to find: “teach a man to fish…”
    • Most of us don’t know the right questions to ask, so finding the answer that’s right for us proves challenging. Any lessons you have learned are ahead start for your kids – teach them what you know, be upfront about what you do not know, and keep them curious!
      • As data access continues to grow, we need to nurture kids’ quality control filters. Not all information is created equal.

How You Can Teach

  • Communicate openly: a trusting rapport is vital to intellectual progress.
    • Many say that silence is complicity. We battle ignorance when we tell stories, explicitly impart lessons, and engage in healthy dialogue
    • You reap what you sow – if you cultivate upfront, vulnerable, and reasonable conversations from the beginning, your kids are more likely to seek your advice when it matters most
  • Solicit questions: help cultivate your child’s curiosity
    • Ask them what good questions they asked each day
    • Encourage them to ask when they don’t know
    • Show them how to ask a deeper question for more information, even when they think they understand
  • Make it tangible: engage more senses to help the point stick.
    • Set an example. Teach them, “Do as I say… and as I do”
    • Use props, especially three money jars that say, “give, save, & live”
    • Read, watch, or listen to credible financial sources

Start Now Press

At Start Now Press, we strive to distill seemingly complex issues into simple, tangible, and actionable principles. We tirelessly read, think, write, and debate in order to improve our content and infuse meaning into each sentence. Guided by our mission, “to plant seeds of knowledge that blossom into a more fulfilling life for every reader,” we are excited to bring our children’s books to life through supplemental content that helps adults apply our lessons as they raise their kids.

We believe that, whether you write a rule, provide an incentive, or impart enlightening information, there are a few simple and empowering principles that can make a world of difference in your child’s life. Above, we’ve highlighted six principles that serve as powerful tools to cut through fear-inducing complexity on our quest to empower the next generation. For more information on our mission or to take a look at our children’s books, visit us online at: https://www.startnowpress.com/.

Financial education is key to a fulfilling life. Teaching kids these lessons early on not only prepares them for the future, but ensures they are building the Wealthy Habits that will last a lifetime. Until next time, remember our motto: The best time to plant a tree was 20 years ago. The second-best time is now.  Start Now!

 

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Net Worth: Know Your Value

Net Worth: Know Your Value

Net Worth = Assets (what you own) – Liabilities (what you owe).

Have you ever been lost in the middle of shopping mall? If you’re like me and you refuse to ask for directions, you probably look for one of those stands with a map of the mall, but let’s be honest: those are usually just as hard to find. Anyway, you get there, you look at the map, and you find the store you want to go to, but what must you first figure out? Where are you? To get where you want to go, you must first figure out where you presently are. Knowing where you stand will help you better prepare for your future. That is exactly how net worth works in terms of your journey to financial freedom.

Your net worth is a snapshot of current financial health or condition. You cannot become financially free until you have a handle on where you are and what you are doing right now. Even more, understanding that very simple number will allow you to see the value in not spending hard earned money on yet another item that doesn’t truly add value (i.e. net worth). So how exactly do you figure out yours? It’s very simple. Assets-Liabilities = Net worth.

The Steps:

First, determine the value of your assets. Assets include any retirement accounts, investment accounts, homes, vehicles, and more. If it has true monetary value, you can include it. To some people, this may be the hardest part of the equation. You may have purchased an item at one price, but that was years ago and the value has definitely changed. If possible, try to find or calculate the current market value of your assets.

Next, determine the total amount of your liabilities. Liabilities are your total debt balances. This includes your mortgage, auto loans, student loans, credit card debts, etc. It may be daunting, but get all these numbers together and add them up. Don’t freak out. It can look kind of scary all together, but remember: each debt still has its own due date, interest rate, and minimum payment. You’ll be fine.

Finally, subtract the two numbers. There you have it. That is your total net worth. Note: If you are married, you can do these same calculations to determine the net worth of your total household. Now, you may be asking yourself “What in the world am I supposed to do with this number now?” My answer: Reflect on it.

Create a Goal

Financially speaking, where do you want to be in five years? Ten? Twenty? This is where you need to start. Take a look at your net worth and decide where you would like it to be. According to the Federal Reserve, the average net worth for families in the U.S. under the age of 35 was $76,200 in 2016 (Intuit Inc.). Take a look at these averages based on age to see where you stand. Are you ahead or do you need to start making major moves forward? That answer doesn’t truly matter. Just do what you need to do to get where you want to be.

Remember, your net worth is just a snapshot of your financial health based on your outstanding debts. Sure, it is difficult to save more and spend less when there are so many things we need and want, but the difficulty gets wiped out when you set a real goal. One big motivator is seeing positive results; this is where knowing your net worth can help. Download an app, like Mint, that keeps track of your net worth by tracking all of your accounts, including your retirement accounts. Watching the amount grow due to improved decision will encourage you to make more of those better decisions.

In the meantime, see how we impart this important lesson on our students here. It is never too early, or too late, to start thinking about your net worth. Together, you and your child can understand the importance of net worth and get started on the journey to financial freedom.

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Online Shopping: The Right Way

Online Shopping: The Right Way

Let’s face it. Times are changing. More and more people are opting to shop online rather than in-store these days. Whether it’s beauty products, clothing, shoes, or even groceries, there is a way to order whatever you are in the market for online. However, so many of us aren’t taking advantage of what could be a great situation.

(more…)

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What Your Teen Needs to Know

What Your Teen Needs to Know

If your teen is anything like most teens, you’re probably losing a lot of money to V-Bucks and new, trendy clothes, these days. Also, if they are like most of their peers, they know very little about the important financial concepts that are extremely relevant to them right now. Since it wasn’t too long ago that I was in their shoes, I’m hoping to help bridge the gap.

Here are SIX things that your teen needs to know RIGHT NOW:

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