The latest online technology along with bank accounts geared for kids have transformed the process of teaching your children about money. User-friendly resources make it easier and fun for kids to expand their financial literacy. Parents should be actively involved in managing online apps and tools, teaching their children to utilize them responsibly. Used wisely, these educational resources can enable kids and parents to effectively track allowance, learn about saving, monitor spending and even build credit.
One of the easiest ways to begin teaching kids how money works is by opening a bank account for them with a parent as a co-owner with complete access to the account. Bank accounts give children a safe place to keep their money earned through chores, work and gifts received. Friends and family can even send money to them electronically. Together, both parent and child can monitor deposits and withdrawals, review the account, and manage cash flow. Check with your bank to find out if they have accounts for children that come with parental controls.
As an example, Capital One’s MONEY checking account for children 8 and older has no fees and no minimum balance. When this account is opened, a parent co-applies and is given access to the account. The parent has control of their child’s spending by being able to lock the card. Once the child is 18, the account is converted to Capital One’s regular 360 Checking Account.
For teens, PNC Bank allows students to open an account if they are at least 16 years old and have a student or government-issued ID. A parent or guardian must be a co-applicant. PNC organizes the account into three different categories: spending (primary checking), reserve (an interest-bearing checking account), and grow (a long-term savings product). The account comes with a debit card and mobile and online access. Overdraft fees do exist in this account, so parents need to make sure their child understands the consequences of overspending.
Children easily adapt to technology making online apps a good tool to attract their attention and learn money skills. To manage cash flow, online services such as Go Henry, FamZoo and GoalSetter are designed for 6 to 18-year-old kids. The apps offer a variety of parental controls and interaction with a debit card such as real-time notifications. Kids learn about saving, investing, and more through quizzes and videos. The GoalSetter app allows parents and children to interact through allowances, saving for goals, and turning off the debit card if lessons are not completed in the app. These apps have a small monthly fee.
To teach children about money without using real money, visit Practical Money Skills sponsored by Visa. This website teaches financial education for all ages and features resources and games to apply what has been learned in a practical situation.
JA Finance Park offers middle school and high school students interactive lessons on income, savings, expenses, and budget through real-life simulations. Students are assigned simulated real-life circumstances as a character and have to make financial decisions based on their character’s income, family size, and living expenses. Experiences are offered in-person in the DC metro area as well as virtually.
Establishing credit is an essential component of being able to make larger purchases later in life. One way for a young adult to build their credit score is through a credit card. For those 18 and older, Discover has a student card with no annual fee and low spending limits (for example, $1,000 to start). Since this is a credit card, it allows the child to build credit when he or she manages it responsibly such as making payments on time. The low credit limit prevents a child from getting in trouble by falling too deep in debt.
Another option is to add a child as an authorized user on a parent’s credit card, which enables them to build credit and establish good financial habits while the parent retains control. However, the parent is responsible for all transactions and misuse can damage both the parent’s and the child’s credit score. The parent and child should have a clear understanding of the responsibility of using the card and explore card limits carefully.
Once proper skills for managing money are firmly in place, a child may want to venture out into the world of investments. We advise to take this step cautiously as getting caught up in trading can lead to unintended outcomes during market declines. One place to experiment is by joining Greenlight, a banking and investing app for teens. This subscription service has various fee levels and includes tools along with an investing platform where the parent approves every trade. Acorns is another option that is linked to a debit or credit card and rounds up purchases to the nearest dollar, investing that difference. For example, if you spend $4.72 at Starbucks, the app will round that transaction up to $5.00 and put the $0.28 into your Acorns account and invest it. The app invests the money rounded up into different portfolios depending on your risk tolerance.
Until a child becomes more responsible and cognizant of investment risks, shy away from investing apps such as Robinhood and Coinbase. While these apps make investing easy, the accessibility to trading allows new investors to try fads like day trading, swing trading, options, etc. Young investors often don’t understand the features, reports, or risks.
SageVest Wealth Management believes in supporting financial wellbeing for our clients and our community, including young adults. Our advisors believe that it’s never too early (or too late) to talk to your kids about financial education. From saving for college to planning your retirement, please contact us to learn how we can help you support your life objectives.
Note: SageVest Wealth Management is not affiliated with any banks, companies, apps or organizations noted in this article, nor does SageVest endorse any of these organizations. Readers should carefully consider the scope of services, costs, and other variables before working with any organization.