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Smart Money Moves: 9 Tips for Teaching Your Kids Financial Independence

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We all wish we’d learned more about managing money when we were younger. Whether it’s budgeting, saving, or investing, the foundation of financial independence can make a world of difference in adulthood. But the truth is, many young people don’t get the financial education they need—at school, at home, or through experience. The good news? You can change that for your kids, no matter their age.

Carrie Schwab-Pomerantz and Chris Kawashima, both certified financial planners, share their expert advice on how to instill healthy money habits in children and young adults, from the early years to the college years and beyond.

When They’re Little: Teaching the Basics of Money

It’s never too early to start teaching kids about the value of money. Here are some simple ways to get them started:

  1. Introduce the Value of Money One of the best ways to teach kids about money is through an allowance. Tie it to simple chores to help them understand the connection between work and income. You’ll be surprised at how differently they’ll treat their own money compared to someone else’s!

  2. Emphasize Saving As your kids start receiving allowances, encourage them to set aside a portion—say, 10%—for saving. This teaches them not only the value of money but also the importance of delayed gratification. They’ll learn that saving now means bigger rewards later.

  3. Introduce Investing Once your kids have saved a bit of money, why not let them try their hand at investing? Help them open a custodial brokerage account or buy fractional shares in a company they care about. Let them choose a few stocks and have regular check-ins to see how their investments are doing. It’s a hands-on way for them to learn the ropes of investing.

When They’re Teenagers: Building Independence and Responsibility

As your kids grow older, they’ll have more opportunities to manage money on their own. Here’s how you can help them build financial confidence during their teen years:

  1. Encourage a Summer Job Getting a job isn’t just about earning money—it’s about learning responsibility and developing good saving habits. Teens who work are more likely to save for the future, so encourage them to start putting a portion of each paycheck away. You could even ask them to contribute to their own expenses—like gas money or outings with friends.

  2. Introduce Them to Credit This is the time to talk to your teenager about credit. Add them as an authorized user on one of your credit cards so they can learn how to manage credit responsibly. Make sure they understand the importance of paying off balances on time and how credit can impact their financial future.

  3. Consider a Roth IRA If your teen is earning income, help them set up a Roth IRA. This retirement account is a great way to teach them the power of compound growth over time. Even though they’re not thinking about retirement just yet, contributing early can pay off in the long run—and the best part is, withdrawals in retirement are tax-free!

When They’re Young Adults: Launching Their Financial Independence

As your kids move into young adulthood, it’s important to help them navigate the next steps of financial independence:

  1. Help Them Set a Budget When your child starts their first job, guide them in creating a realistic budget based on their income and living expenses. Many young adults underestimate the cost of living on their own, so helping them plan for everyday expenses like groceries, utilities, and rent will set them up for success.

  2. Encourage Them to Stay Invested Time is one of the most valuable assets your young adult has. Help them understand that the earlier they start investing, the more they’ll benefit from compound growth. Encourage them to choose low-cost index funds or consider a robo advisor to simplify the process. Staying invested for the long term will give them the financial foundation they need.

  3. Let Them Know They’re Not Alone Financial independence doesn’t mean your child has to go it alone. Encourage them to seek help from financial professionals when needed—whether it’s for retirement planning, investing advice, or budgeting tips. Let them know it’s okay to ask for help, even if they’re financially independent.

It All Starts at Home: Lead by Example

While state governments are beginning to implement financial literacy programs in schools, there’s no substitute for leading by example. By demonstrating healthy money habits at home, you’re teaching your children valuable lessons that will serve them well for the rest of their lives.

Whether it’s sticking to a budget, saving for a rainy day, or investing for the future, showing your kids how you manage your finances will give them the confidence to do the same. Remember, the foundation you lay now can help them build a financially secure future. So start today, and make financial education a lifelong conversation.

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www.schwab.com/learn/story/9-tips-teaching-kids-about-money
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