How Dads Can Better Prepare Their Children Financially
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Let me start by saying I am not a financial guru. I don’t have any degrees or certification in anything related to finance. I never learned anything higher than Accounting 102. This advice is purely my own experience in life and in raising my children.
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A new Dad Hack is brewing but we wanted to get some feedback first. I recently opened custodial accounts for my kids using Stash. I add a few dollars to a fund every two weeks. I told my son who immediately gave me $5 of his $9 he was waiting to spend on something to invest in a stock/fund. Do you invest in anything for your children? #TheDadTax #DadHacks
A Better Future
We have the obvious things in place. A Life insurance policy that will ensure that our kids don’t financially struggle if anything were to happen to us.
We have a good agent who looks out for our best interests.
We have a college plan that goes beyond hoping our children are the best ballers in the state.
This post isn’t about making sure the kids are set in the unfortunate event that we pass away early in their lives. I don’t want that to happen, but we are prepared.
This isn’t about college planning or anything like that either. We are planning financially and if the kids continue to excel the way they are then college expenses will not be a concern.
This is About Financial Literacy
The schools don’t teach it. Most parents don’t teach it. I was not taught financial literacy.
The lack of financial education dooms most children to a lifetime of struggling financially even if they receive a lot of money from life insurance or inheritance.
I took it upon myself to learn, and I am still learning, as we all should. The financial world evolves just as rapidly as any other world.
Dads should pass financially literacy on to their children. Because it is extremely important and is not taught anywhere else.
When I was done with college I was in a lot of debt but I did not understand the impact it would have on me. I did not know how it makes it harder to get credit and if you do you will have higher interest rates that can cripple you financially.
I didn’t know that bad debt stays with you for many years.
I didn’t know there are ways to take care of the bad debt.
I didn’t know how important it was to have money saved up somewhere.
I had no clue about the stock market or other ways of investing. If I did I would be much better off now.
If I knew in my teens what I know now I would be so much better off financially. Instead of blowing my entire paycheck on nothing during a time in my life when I had very little responsibilities financially I could have been saving and investing.
I did not receive this education.
My Children Will
Dad Hack Three – Use Stash Investment App For Your Children’s Financial Future
We have already started investing for both of my younger children. To do this I use an app called Stash.
There are a number of apps today that can accomplish your goals but I had been using Stash for a little while for my own investing.
To be clear this is not the only means of me investing but something that makes it easier to pick what sector/fund and in some cases stocks you want to invest in.
The cost to you is minimal.
If your account balance is under $5000 then it costs $1 per month. If it is over $5000 then it cost .25% per month.
Trades do not cost anything.
Seems reasonable to me.
What Can You Invest In?
Stash allows you to invest as little as $5 initially.
You can invest in one of the numerous funds. Funds are industry focused so there’s tech options, healthcare, defense, and green initiative funds.
There are also funds that you can select based on risk. Higher risk usually means higher reward (or higher loss).
Stash recently added the ability to invest in some individual stocks. For example, I invested in Microsoft.
You don’t have to invest in any stock on a per share basis as you do with traditional methods of investing. If you wanted to invest just $5 into Microsoft you could even though a share of Microsoft is currently about $113.
If Microsoft pays dividends (which they do every quarter) you get a little piece of it based on your investment.
Stash also has an educational component for anyone who wants to learn about investing. This comes mostly in the way of blog posts but is very helpful for anyone who wants to learn more.
And it’s free!
I would strongly encourage anyone who needs to save money for whatever reason to consider Stash. I would more strongly suggest that you open a custodial account for your children.
Even if you put $5 a month into a trade it will help them get started in life once they become adults.
Savings accounts earn maybe 1% if anything. Certificate of Deposits are not much better. I am currently up around 5% on my Stash account.
Results do vary based on what you invest in and the risk factor as well as stock market performance.
I can sell and withdraw at any time without much of a hassle. (I am not going to go into tax implications here, speak to a tax professional first).
Stash is also planning to add debit cards soon.
Financial Literacy 101
The one thing that we have struggled with concerning our kids and their financial literacy is getting them to understand the value of a dollar.
Isaiah (8) seems to be turning a corner so progress is being made. I just told him recently about his account on Stash. He immediately gave me $5 of the $9 he had to invest. He’s showing promise.
Both of my younger kids always want to spend money. I am sure all parents know the routine.
At home: Not Hungry
In the Car: Hungry – they want to go out to eat.
Every commercial that comes on TV: Daddy can I have that for Christmas?
We do give our children a few dollars every month to do with as they please. The minute that money hits their hand they want to go to the store.
To be fair Isaiah does talk about giving some to help someone in need. This is also very important. I cannot stress enough the importance of teaching your children to give.
It really is hard to teach a 4 and 8-year-old why they should be smart with their money. They cannot possibly fathom what’s ahead for them in life.
For now, we let them spend their monthly stipend as they see fit while maybe nudging them in a certain direction.
What’s the Lesson?
When they run out of money on day 3 of the month they no longer have money to do anything else. We caution Isaiah of this before he spends it and he sometimes changes his mind.
And as I said earlier, he did give me more than half of what he had left to invest. Progress.
Play Monopoly or Cashflow for Kids
We occasionally play monopoly. Believe it or not, this is a great teaching opportunity as well. Just as in real life you cannot purchase a property in Monopoly if you don’t have enough money. And there are bills to be paid.
Just Use Your Card – the Response
This one is a little harder for them to understand at this point. They think that little piece of plastic means there is an unlimited supply of money.
We all know that is not true.
We are considering getting Isaiah a prepaid card and putting his monthly stipend on it to help him understand.
Great Books to Help Teach Your Kids Financial Literacy
Thankfully Isaiah loves to read. His Uncle purchased:
A Penny for Your Thoughts
My wife and I are in agreement that education starts at home. Isaiah and Izzy both learn at home first and then at school.
When it comes to financial literacy (and a few other topics) the only place they are going to learn is at home. The public school system does not teach kids how to invest, save, or balance an account.
They don’t teach the consequences of bad credit or debt.
The system is not designed to keep people out of debt. Just look at student loans. Once a child is done with college they can be more than $100,000 in debt.
How can you start your adult life that way?
Teach Your Children. If you don’t know it then learn it and teach your children. End the Cycle.