Tips to Help Your Children Become Financially Independent

Parents often want their children to have a better financial future than they did. Ross Mack, a Yahoo Finance contributor and father, shares his insights on how to kickstart a child’s wealth-building journey early.

In this article, we will explore tips and strategies to help your children become financially independent.

1. Understanding the Basics of Money and Wealth Building:
   The first step is to help children understand where money comes from – it comes from work. Encourage them to understand how their money can work for them, not just for them. This can be done by opening a custodial account, which allows you to show them how their money can grow and compound over time.
2. Teaching Children to Invest and Understand the Economy:
   Teach children about investing by showing them how companies they use on a daily basis, such as Google, YouTube, Nike, McDonald’s, Chipotle, and McDonald’s, are owned by them. This helps them understand the concept of ownership and how they can benefit from it.
3. Utilizing Custodial Accounts and 529 Plans:
   Custodial accounts and 529 plans are powerful tools for saving for education. A custodial account is a type of investment account for minors, while 529 plans are tax-advantaged savings plans designed to help pay for education. Both can be used to set up a better life for your children and potentially reduce their need for student loans.
4. Establishing Credit and Financial Responsibility:
   Teach children about credit and financial responsibility by opening a custodial Roth IRA, which can help them establish credit early on. This can potentially help them avoid needing a parent as a co-signer or guarantor for leases or other financial obligations.

Conclusion:

As parents, we want our children to be financially independent. By teaching them about money, investing, and financial responsibility, we can set them up for a better future.

The question is, are you doing enough to help your children achieve financial independence?