Skimm Money: Your Kid's Financial Future Special Edition

The money stories everyone’s talking about.

Lower grocery bills, an expanded child tax credit and less expensive prescriptions — presidential nominee Kamala Harris unveiled some of her economic ideas, focusing on "kitchen table" price topics.

Being honest with your kids about money problems may seem difficult, but it might also be a great idea. Here’s how to do it. 

Inheriting a nice chunk of change can set your kid up for life. But is it worth skimping on your own dreams right now to make that happen? Experts weigh in. 

Don’t hustle your kid out of the room when your boss calls. Watching you work can leave a lasting impression, and give them the tools they need to financially succeed in the future.

Are you the birthday grinch if you don’t let your kid spend any of their gifted cash? This TikTok mom does just that, saying they’ll thank her in the future. Best mom ever or killer of joy?

Buying or selling a home? Heads up: New real estate rules just dropped, shaking up how agents get paid and who foots the bill. As if sky-high interest rates weren’t enough of a challenge. 

P.S. Wake up to today’s most important stories right in your inbox by signing up for the Daily Skimm. Millions of your friends have already done it.  

How the news affects your finances.

Future-Proof Your Kid’s Money

When you’re spending an insane amount of money on everything from diapers to daycare, it can seem impossible to then also set funds aside for your kid’s financial future. And we don’t mean just preparing to offset the cost of college — all of the money decisions you make today have the potential to impact their financial stability in early adulthood and beyond. (No pressure or anything.) 

One of the greatest gifts you can give your child is showing them how to manage money wisely, says Katherine Fox, CFP and founder of Sunnybranch Wealth. “So much of how we approach money is based on what we see when we’re young,” says Fox. 

Aside from modeling good money habits, here are some popular financial tools designed to help you save money for your kid’s future.

Your Move:

• 529 plans provide tax-advantaged savings for educational expenses, but offer some flexibility. If your child doesn’t use the whole plan for school, it can be rolled over into a Roth IRA for them, which can grow tax-free to fund their retirement or other long-term expenses, like buying a house. Bonus: Relatives and friends can also contribute to a 529, says Misty Lynch, a certified financial planner and owner of Sound View Financial Advisors.

• UGMAs and/or UTMAs are taxable investment accounts that transfer to your child between 18 and 25 and can be used for anything. If you’re planning to invest substantial assets or want to have more control of how they use that money, a trust may be more appropriate.

• A custodial Roth IRA can be opened in your kid’s name if they earn taxable income. It may be hard to convince a teenager to put money away that they shouldn’t touch for decades, but explaining how that money will grow might win you points. An alternative option, if you’re able: Match their earned amount as a contribution to the IRA, and let them spend their cash, says Fox.

If that stat makes you worried your kids will be on your payroll forever, you're not alone. But opening a kid’s investment account with Fabric by Gerber Life can help set them up for financial independence. 

You can start by investing as little as $1 a day, and then watch the money grow while they do. They can use the cash how they want as adults, and you’ll be able to make penalty-free withdrawals to help cover the cost of childhood expenses like school supplies, tutoring sessions, and sports leagues — which tend to pile up right about now. Psst…in honor of back-to-school season, they’re giving $25 to new users who open an account by Sept 15.^† Get started in just five minutes.

We asked you to vote on a question you’d like answered. The winner was:

Should an allowance be tied to chores, or given unconditionally?

FEATURED EXPERT:

Michele Pasqualina

senior wealth advisor at Aline Wealth

It’s totally your call. Whether it’s earned or given freely, an allowance is an opportunity to show your kids how money works, says Pasqualina. Have them save a portion of their chore money, and chat with them about how it’ll grow. Younger kids can routinely count their piggy bank money, while older children can project future income or learn about interest with a simple calculator. “Set the expectation that their savings can continue to go up.” says Pasqualina. (Related: Here’s What Parents Really Pay Their Kids in Allowance)

If you’re thinking of paying your kid for chores, start small — tidying up their room or setting the table for meals. As they get older, they can earn more $$$ for bigger tasks like babysitting, yard work, or cooking. For teens, consider opening a bank account in their name using their chore cash. Tip: Bank accounts for kids often require a low or zero minimum balance and may offer financial literacy tools as well as an ATM card and online account access. “When my son uses [my] credit card, he immediately sends me a Zelle payment. This way, he can see his savings going down with each purchase, so he curbs his everyday spending,” says Pasqualina. (Related: The Best Savings Accounts for Kids and Teens)

One act of financial self-care you can do in five minutes.

Use games to teach financial knowledge

Raise your hand if Monopoly taught you more about money management (for better or worse) than real-life adulting. The good news is that today there’s an entire category of games that can actually teach your kids age-appropriate financial tools they can actually use. They’re way more fun than staring at spreadsheets. Here are a few free online games that can help your kids learn about money, at every stage.

• For ages 5–12: Counting With Coins, from the US Mint, teaches kids how to add up multiple purchases. 

• For ages 10–15: Hit the Road, from MyCreditUnion.gov, lets kids plan a road trip, while keeping their budget in check.

• For ages 17+: Payback, from Next Gen Personal Finance, helps teens understand how student loans work — and how their future college major and career decisions could affect their paycheck.