Here’s How to Talk About Money Matters With Your Kids and Plan Their Financial Success
As a parent, you can't help but think about your child's future often. "It's important for parents to save what they can, when they can," Tony Durkan, a vice president and head of 529 relationship management at Fidelity Investments, told Fox News Digital. One of the best things you can do for your child's future is to start saving money as early as possible. Moreover, with only 57% of American adults financially literate, a strong education in personal finance has become more important than ever. Instilling a financial mindset in children is a proven strategy to nurture success in engaging in activities.
Other steps like creating a children's savings account, or leveraging a 529 college savings or prepaid tuition plan are great ways to secure your child's financial future. As per Durkan, the 529 savings account can be a "flexible, tax-advantaged" way to save specifically for education. There are currently two kinds of 529 plans. One is a general college savings plan that allows parents to put a fraction of their income aside in an account which can be later used at any college or private K-12 institution. The other option is the prepaid tuition plan which locks the current tuition fees of the public institutions. Other than this, it's also a great idea to open a health savings account. The money you save here is tax deductible and also grows tax-free. It can also be withdrawn tax-free for qualified medical expenses for yourself and your child.
Parents who have a child with a disability may want to open an ABLE account, which was introduced in the legislation in 2014. It allows up to $17,000 in contributions. This can help parents save money for their children without risking their eligibility for food assistance or any other Medicaid programs. In an interview with Greenville News, Mark Henry who has been working in the finance and business sector and is the founder of Alloy Wealth which aims to help people create written financial plans talks about how parents can help their children become financially sound. According to Henry, it's important to teach kids how to manage money from an early age. He urges parents to encourage their kids to make grocery choices and also teach them the difference between wants and needs.
Henry also recommends opening high-yield savings accounts for your children which will help your child's savings grow way faster, while also showing them how interest works. Henry also sheds light on the importance of investing. "Teach your children how to invest," he says. He urges parents to talk about their portfolio with their kids and asks them to identify the good investments on their own. "Once kids have some savings built up, show them how to get started," he says.
Kelly Lannan, senior vice president of emerging customers at Fidelity Investments talks about the perks of creating a custodial account. These are the kinds of accounts that can be managed by an adult on behalf of a minor. This will enable teams to take money matters into their own hands. "[It's] the industry’s first and only teen-owned brokerage account and allows teens to save, spend, and invest in one single account. The teen is actually the owner of the account, so they’re able to make investing decisions on their own, with parental oversight," she said.