Smart Money

noted.

SMART MONEY

Financial literacy for kids—on a deeper (and digital) level

WORDS VICTORIA TONG + ALEXIS PATTERSON H OW MUCH CASH IS IN YOUR WALLET RIGHT NOW? These days, we’re lucky if we have anything at all to tip the carhop when we run the kids by Sonic for an after-school treat. (Ugh, tip guilt.) In this digital world, we’re more likely to pay for things with our smartphones using apps like Venmo, Zelle or Paypal, or—if we’re feeling a bit more old-fashioned—with a debit or credit card. While these forms of payment are convenient, they don’t inherently demonstrate that “real money” is behind every purchase.

If you don’t want your kiddo to learn that lesson the hard way, it’s time to start talking about spending and saving. You can start with the very basics when they’re young (make a game out of identifying coins, for example;

check our February/March issue for more ideas aimed teaching small kids). As your child grows, it’s vital to tackle less-tangible approaches to using and managing money.

ACCOUNT BALANCING ACT

You may have heard of debit cards, financial apps and bank accounts meant for kids, but resist abstract currency until your child reaches about age 9, advises Keli Calderon—the Plano mom who created The Smart Money Academy, an online resource to teach kids about finances (thesmartmoneyacademy.com). To determine if your child is ready for an account, Calderon suggests you evaluate a few different factors. First, ascertain their level of understanding of the role the bank plays. Second, assess how responsible they are with cash, and third, count how much money they have.

Different financial institutions have their own age parameters for kids’ accounts, but when you move forward, it’s essential that you emphasize the importance of keeping the PIN, account number and password secure. “In recent years, the number of young people who have fallen prey to scams has exceeded that of the elderly,” Calderon says.

Cate Chesser, a Richardson mom of four, says her 9-year-old daughter understands the need to keep sensitive info confidential. “My oldest is transitioning to a bank account because she has shown she is developmentally ready,” Chesser explains, adding that she’s also looking into debit cards. “I like the features they offer and the independence it will let my daughter have.”

Before handing over a debit card, you will want to teach the importance of keeping it safe and what to do if the card gets lost or stolen. You’ll also want to determine how much financial freedom your child should actually have. Some cards provide parental alerts when it’s used or let parents restrict certain purchases.

There’s a lot to consider, but these tools help prepare your child for long-term financial literacy. “It’s a shame how many kids never learn about a bank account or credit cards or saving until they leave home,” says Emily Harwood, a Dallas mom and financial consultant with Charles Schwab. She recommends getting an account or debit card for your child when they’re in middle school or high school, “so they can get comfortable with the idea of budgeting and not overspending while the stakes are low.”

Harwood says that without this foundation, trouble awaits as kids get older. “So many college kids sign up for a bunch of credit cards because they’re offered a free T-shirt or a discount on some purchase,” she explains. “Next thing you know, they’ve got a bunch of cards and payments and have already started damaging their credit.”

FINANCIAL INSTITUTIONS AND APPS WITH TOOLS FOR KIDS

MONEY MANAGEMENT

America’s Credit Union: The Kids Club Savings Account is for children from infancy through age 12; the Smart Start Savings Account is for ages 13–18. Teens are also eligible for a checking account and debit card. Multiple locations, 972/494-5328; americascu.org/kids-savings-account

Chase: Chase customers can open a Chase First Banking account, which comes with a debit card, for kids ages 6–17. Parents can set up alerts and limits through the Chase Mobile app and approve or decline money requests. There is no monthly service fee. Multiple locations, 800/935-9935; chase.com/firstbanking

Credit Union of Texas: If you have a kiddo under 18, you can open a kids’ savings account with as little as $5 and no minimum balance. Account holders in grades 6–12 are eligible for the Pay for Grades contest. If your child is selected in a drawing, they win $25 for every A on their report card and $5 for every B (core classes only). Multiple locations, 972/263-9497; cutx.org/savings/kids

Greenlight: This debit-card-and-app combo (designed for kids and teens, with parental controls) comes with fees ranging from $4.99 to $9.98 per month. Options include up to 2% saving rewards, cash back from purchases deposited into savings, and an investment platform. 888/483-2645; greenlight.com

Rooster Money: This app allows parents to set up a virtual allowance and helps kids manage spending and saving. Some features are free; the family membership provides premium services for $18.99 per year. roostermoney.com/us

INVEST IN THE FUTURE

Harwood established an investment account for her now-teenage son at birth. As soon as he started receiving gift money and an allowance, he could choose whether to keep those funds or put them into the market.

Custodial brokerage accounts can be opened for a child at any age, with the parent or legal adult guardian as the custodian, but Calderon thinks age 9 is a good time to start teaching your child how to invest. You can open the account for your child with a small amount (no minimum for a self-directed account at Charles Schwab or Fidelity), and while minors can’t make trades or withdraw funds, the child does own the assets— so it’s worthwhile to engage them in account discussions. And perhaps let them choose at least one investment, preferably something that aligns with their interests.

To start, use simple math to show your child how an investment can turn a small amount of their money into something more substantial. Of course, you also need to present the risks. Harwood recommends Charles Schwab’s Moneywise resources (schwabmoneywise.com/ teaching-kids) to help with these conversations.

Cryptocurrency is another way to invest. Right now, Calderon believes this virtual payment system shouldn’t be the main area of investment. “Per Warren Buffett, only invest in what you understand. Crypto is very hard to understand,” Calderon says. “And it doesn’t have a long history, which makes it difficult to predict.” Kids may be curious though, particularly if video games like Roblox or Fortnite introduced them to virtual payments. Rooster Money, a youth financial app and website, explains the pros and cons and offers cryptocurrency activities (roostermoney.com/ us/talking-about-cryptocurrency).

MONEY TALKS

Some transparency with your growing child is important. “My kid doesn’t know exactly how much we have, but he understands generally what sort of financial situation we’re in,” Harwood says. “I think that helps him get the decisions that are made about our home, cars, vacations and discretionary spending.”

These discussions and lessons (or lack thereof) will have a definite impact on your child’s future. “Money affects every aspect of adult life,” Calderon notes. “It should be taught in balance with other things, but failing to teach your child about money could ultimately make it their whole life’s focus.”