Created by: Fidelis Wealth Advisors
As this topic continues to be our most read and popular topic, we’ll continue our series of “How to talk to your kids/teenagers about money”, by focusing on teenagers today.
Our previous newsletters focused on creating good habits with younger kids that will hopefully translate into better decision-making as they grow. The habits discussed in those newsletters still apply to teenagers, but we’ll take a slightly different approach with them.
Here are few actions your teens can do today, not only to instill good habits, but also to set them up for financial success:
Open a Roth IRA:
Teens can open a custodial Roth IRA with a parent, and as long as they earn money throughout the year, can contribute up to the annual limit. While there are some circumstances for which they could tap into this money without a penalty before retirement, ideally this becomes the foundation of their retirement savings. Remember, with Roth IRAs, money that is saved will grow AND be distributed in the future tax free. The power of compounding interest cannot be understated especially if they start as a teenager.
Open a Bank Account/Checking Account:
While I’m a big believer in kids and teenagers handling physical cash because it teaches lessons that swiping a card can’t teach, all teenagers should have a bank account in their name. Teach them online banking and how to use money transfer tools like Zelle. Be pro-active in helping them send money back and forth using these different tools and learning how to deposit and withdraw funds. They might make mistakes with overdrafts or ATM charges or other missteps, that’s okay!
Read a Book:
Books on money and investing are endless. One book I would suggest that is easy to read but teaches timeless principles is: The Psychology of Money by Morgan Housel. The book reads in a conversational tone and it teaches lessons on wealth, greed, saving, and having perspective with money.
Instilling the right habits early is important. When your kids become teenagers, getting their financial setup correct is equally important. Enable them to not just learn, but also do. By learnings early, they’ll be able to build a foundation of good money behaviors that hopefully will translate to better decisions in the future.
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