As financial planners in Charleston, we have had the privilege of assisting many families with their money management. One of the most important things we have learned in our business is that it is never too early to start teaching children about money. In fact, the earlier you start, the better. When it comes to money management, teaching kids the essentials provides them with a strong foundation and helps them to develop the fundamental skills for financial planning to achieve success later in life.
Start An Investment Account
Investment accounts are a great place to start teaching your grandchildren about money management. One of the best ways to do this is to consider creating a UGMA account in their name. A UGMA account, or Uniform Gift to Minors Act account, is a custodial account that can be given as financial gifts to minors without establishing a trust. The account is held in the name of the minor while being controlled by a custodian until the minor reaches the age of majority, typically 18. UGMA accounts are also tax-deferred until the child reaches this age of majority making it a great way to save for their future at an early age.
Invest in Stocks That Your Grandchildren Might Like
Stocks don’t have to be boring, they can be fun, and investing in fun products or companies your grandchildren love can be a great way to get them excited about their investment portfolio. One way to encourage your grandchildren to want to learn about the stock market is to invest in things that they themselves are passionate about. When children are invested in stocks they are interested in, they feel a real sense of ownership over that company and are more likely to pay attention to the stock market and learn how it works. Encouraging this connection to the stock market can help your grandchildren develop a lifelong interest in investing and financial literacy. Some companies to consider investing in based on your grandchild’s interests might include Tesla, Disney, Netflix, or Matel.
Consider talking with your grandchild and letting them choose the companies they are most interested in investing in if they are old enough. According to a Greenlight study conducted in 2021, adolescents really are interested in learning about financial literacy. This study states that 75% of teens did not feel confident in their financial literacy, but a promising 74% said they would like to learn more about money management and financial planning.
Review Their Portfolio With Them
On occasion, if your grandchild is old enough, review their portfolio with them. Show them how they made or lost money. This helps to continue the conversation on financial planning and increases the child’s sense of ownership over their investments.
Have Their Financial Advisor Provide Education on What Stocks Are And The Importance of Investing
Having an expert explain your grandchild’s portfolio to them will show them that their financial endeavors are serious. Your financial advisor can offer education on the basics of the stock market and how it works, teaching your grandchild the risks and rewards of investing.
Your financial advisor can also help your grandchild set financial goals and develop a plan to reach those goals.
As your grandchild gets older, your financial advisor can help your grandchild choose investments that are more appropriate for their age and track their investments, making changes to their investment portfolio as needed.
Oh… your financial planners won’t do that? We do!
We offer a multitude of financial services that can help you help your grandchild build the investment portfolio that’s right for them, no matter the age. While investments do play a large role in financial literacy, they are not the only component of a healthy financial plan.
Start a Donor Advised Fund and Have Your Grandchildren Help Direct the Funds
Sharing is an integral part of having wealth, as well. Sharing our wealth helps us to make the world a better place by supporting causes that are important to us. It is essential to teach your grandchildren the importance of not just sharing toys but their money as well. One way to practice instilling this value in your grandchildren is to encourage them to give a portion of their allowance or earned income from summer or part-time jobs to the donation plate at church for instance.
Creating a Donor Advised Fund
A donor-advised fund (DAF) is a type of charitable giving account that allows donors to make contributions, receive immediate tax deductions, and recommend grants from the fund over time. Using your own appreciated assets is a good tax-efficient way of donating to charity without having to give the money to a specific charity right away. Some benefits DAFs offer include the following:
- Tax benefits
- Investment options
- Ease of use
DAFs are an important part of a comprehensive money management plan and can help donors save money on taxes, grow their charitable giving and make a difference.
Let Us Help You Help Your Grandchildren
As a family-run business, we love helping our clients (and their families) learn more about their finances no matter how young or old they are! Contact us today to speak with one of our expert financial planners in Charleston for help with any questions regarding your grandchildren’s financial planning and money management.
MFC is an independent investment adviser registered under the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about MFC including our investment strategies, fees, and objectives can be found in our ADV Part 2, which is available upon request.