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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.                 

Question: I’m trying to save for college for my child. Can you explain what a “529” plan is and how it works in Ohio? Any particular issues or restrictions I should watch out for with this method of college savings?

Tax Partner Dave Baymiller’s answer: A 529 plan is a Qualified Tuition Program and is also referred to as a College Savings Plan.  These plans are established by states to allow for contributions to be made to an account for paying a student’s qualified education expenses at a postsecondary institution. No federal deduction is allowed for the contribution, but no tax is due on the distributions that are used to pay the qualified education expenses. Under the Ohio plan, you are allowed to take an annual state deduction on the Ohio tax return of up to $2000 per beneficiary and any excess is allowed to be carried forward and deducted in future years. So, if you contribute $4000 to the Ohio plans for two beneficiary students during the year, you would be allowed to deduct $4000 ($2000 each) with the remaining $4000 carrying over to the next year. But, you don’t have to contribute to just your resident state plan. Also, just because amounts are in a state plan does not mean that the postsecondary institution needs to be in the same state. Some things that you need to watch out for are: Federal Gift tax issues- If you contribute more than a certain amount in a year per beneficiary, you will want to consider making an election on a timely filed gift tax return to treat the contribution as made over 5 years. Distribution issues- You want to make sure that when amounts are distributed that they are used to pay “qualified education expenses “. Don’t just assume that because the expense relates to college in some way that it is going to be included as qualified. You also want to make sure that you are timing the distributions to cover the expenses in the proper periods. This is a common trap. Excess distributions are subject to not only income tax but also to a penalty. You as the owner of the account or the beneficiary will receive a form 1099-Q that shows the full amount of the distributions during the year as well as the earnings portion of that distribution. You should also be looking for a 1098-T from the institution that has information about the expenses. Don’t ignore them. They need to be reported properly with your income tax filing. If not, you will most likely receive a notice from the IRS with a calculated tax and these are somewhat painful to get resolved. 

Dave Baymiller is a partner in the tax services area with over thirty years of public accounting experience. He practices exclusively in the area of federal, state and local taxation with an emphasis on tax planning and consulting. Learn more about Dave's expertise.