GJM’s Charlie Heid On Your Kids & Money
A recent study by T. Rowe Price showed over half of parents worry they spoil their kids and 71 percent are reluctant to talk to their kids about money.
Are you teaching your kids what they need to know about money? Or are you spoiling them? GJM Tax Partner and CPA Charlie Heid offered up some advice for parents on Fox Toledo News. Here are some key points on what your child should know by the time they reach 18 years old.
1. How to Save for a Goal
Idea: try a savings bank for preschoolers. They can learn to save to buy a toy. Tip: attach a picture of the toy to the bank. Elementary/middle school: open a savings account, aim for a bigger goal, you can offer to match their savings. High school: make college savings the goal.
2. They can’t have everything they want
If you buy them everything they want, they’ll feel entitled. Tell them why you’re saying no, offer an alternative.
3. How to Earn Money
Valuable lessons can come from that summer job: responsibility, getting along with coworkers, being on time. Their own paycheck means an opportunity to manage their own money and understand that tax withholding even applies to teenagers. They can contribute to a Roth IRA and even get an early start on retirement savings.
4. How Fast Money Grows
Teach them the concept of compounding interest using something called the rule of 72: 72 divided by the interest rate equals the number of years it will take for your money to double. MoneyChimp.com compounding calculator can do it too
5. How to Stay Out of Debt
Teach your child that using a credit card is taking out a loan you will have to repay with interest (unless it is paid off monthly). There are differing opinions on whether it’s helpful to have your teens become authorized users of your credit card. One school of thought: let them learn about covering their expenses with a college checking account before starting a line of credit after they turn 21 and can do it themselves. Source: Kiplinger.com.
Charlie Heid is a tax partner with Gilmore Jasion Mahler specializing in Tax. Learn more about Charlie's expertise.
