Being savvy about money is an important skill to have, but it’s also one that few families teach their kids. Lots of people muddle through their 20s without saving much or planning for retirement, then get serious about it in their 30s or even 40s. By then, they’ve probably learned a few lessons the hard way. They might have kids and want to start saving for college.
Grandparents can really help here. Grandparents usually have more financial know-how than their kids or grandkids, as well as time to spend talking through the factors that make a good investment. There are many different products to use to teach kids about saving--a savings account, a CD, and microinvesting apps.
A savings account is probably the easiest one to open. You and your grandkids can go to the bank and open the account together. Either you or one of their parents will have to cosign on the account. Younger kids can have fun doing chores to earn money, then depositing some of it in their account. Grandparents can offer to match any money the kids decide to put into savings. This encourages them to save. Another good way to teach them about the value of saving is to have them save up their money if they want to buy a large or expensive toy. This can teach them the value of hard work (if you pay them for chores), as well as patience to save up for things they want.
Traditional savings accounts are easy to open, but they don’t typically have high interest rates. You can discuss with an older grandchild the difference between a savings account and a CD. They need enough math skills to understand how to calculate the interest they would earn in the different types of accounts over the same time. This highly practical application of their math lessons can encourage them to see math as useful, rather than just a boring, pointless subject only for school.
Banks usually want a larger investment to open a CD than a savings account, so a CD can be a next step when kids have a fair amount of money in a savings account. The other thing you can teach kids with a CD is to look at several different banks and figure out which one offers the best deal for their needs. They should think about the interest rate, the length of the term of deposit, and any penalties for taking money out early.
Microinvesting apps are one of the newest tools for learning financial basics. You can open them with just a few dollars. These apps allow users to purchase fractions of shares in many different companies, as well as shares in EFTs. EFT stands for exchange-traded fund. It’s made up of several different stocks, bonds, commodities or even currencies. Investors purchase shares of the fund.
The apps offer several different services, including personalized advice, to help you make the most of your investments. This is a great way for kids to watch their savings grow, learn about how stocks can turn a profit quickly, and also see how taking risks sometimes pay off but sometimes don’t. They can also feel excited about owning a small part of companies they know and use already.
Let’s look at three of the top investing apps, so you can decide which one will work best for you. You might even look at them with your grandkids, so they can learn about comparing costs and benefits, too.
Stash offers three different levels of monthly subscriptions. If you’re investing for kids, consider Stash+ for $9 per month. This level will allow you to open custodial accounts on behalf of grandkids. A custodial account is managed by an adult on behalf of the child, though it is legally the child’s property. The account also includes the ability to invest in a traditional or Roth IRA, advice about retirement, the best advice and research on investments, and the option to purchase life insurance. Use this link to get started and sign up with Stash.
Acorns is another app with a special program for kids. The Family plan is $5 per month. You can add several kids to the plan at no extra cost. The plan includes access to a library of expert articles and advice, which you and your older grandkids can study together. You can also get personalized advice for your family. In addition, there are lots of tools for easy saving and investing, as well as tax advantages. To get started with Acorns, go to the Acorns website.
Robinhood is our last app and is a little different than the other two. Rather than having subscription levels and monthly fees, it is completely free to sign up. There are also no commission or trading fees. You can opt to invest in full shares or fractional shares. The DRIP feature (dividend reinvestment program) automatically reinvests dividends you earn on your investments, so your portfolio grows without you having to babysit it. This app allows you and your grandkids to learn about investing in a small-scale, low-risk way. Learn more about Robinhood and sign up to learn more.
However you decide to teach your kids and grandkids about saving money, we encourage you to start as soon as possible. The longer you have to save, the bigger the nest egg will be when your grandkids are old enough to start college or move out on their own.
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