VIRGINIA BEACH, Va. (WAVY) — It is so important to give our children the best start in life, but when it comes to planning their financial future, all of the options out there may feel a bit overwhelming.
Adam and Kylene Carroll of Virginia Beach decided they wanted to help their children save money after their 11-year-old daughter, Riley, created her own business called Shellabrate.
“I saw that the SPCA needed help with donations, so I decided to sell [my shells] and raise money for them, and then I did Toys for Tots and Beach Bags,” Riley said.
The majority of the money Riley makes goes to help local non-profits. As for the rest of the money?
“I keep some of it for myself, and my parents put some in an account,” Riley said.
Riley’s dad said the value of saving is something he and his wife believe is important for their children to learn at a young age.
“I think my wife and I realized that that we were both a little financially illiterate later in life,” Adam Carroll said, “and one of the things we want to try to make sure our kids grasp earlier than we did was some sense of financial literacy, how the market moves, and those kind of things that’ll help them later on.”
So the Carrolls turned to Eric Bartok, a financial advisor and managing director at Oppenheimer & Co., Inc. in Virginia Beach.
“I think the best advice that I could give parents is to start early,” Bartok said, “and I’m not sure that there is a too early. Start with small amounts. They don’t have to be big amounts, but through saving and compounding, it will have a life-changing effect over time.”
Bartok said the first thing a family should do is sit down and discuss their goals for the money they’re going to put away. Discuss debit versus savings. Bartok said he is a big fan of a savings account, which is what the Carrolls selected for Riley, because of the power of compound interest.
“Somebody who can save even $6,000 a year for 10 years from the time they’re 20 to the time they’re 30, by the time they’re 60, that grows to more than $2 million,” Bartok said.
Adam Carroll said the specific savings account they have for Riley is called a Uniform Transfer to Minors Act account (UTMA).
“It’s a savings account that is invested in the market,” Adam Carroll said. “Think of money market account for a kid, but the really attractive part of it is that you can set when your child gets the funds as their own. There’s an early date and a later date. We picked a bit of a later date for her, but she gets to watch it grow. She gets to hopefully, over time, understand how invested money works versus how interest bearing money works.”
The Carrolls say they are very happy with their account selection.
“We have three children, and we’ve opened similar accounts for all three,” Adam Carroll said. “So our family, we drip a very tiny bit of money into it each month and I think the main benefit or teaching lesson we get out of it is to be able to show our other kids this is what the mom and dad drip plan looks like, and this is what the mom and dad plan, plus the kid contribution plan, looks like. So the other two are already wanting to open a lemonade stand and try to catch up to their big sister.”
If you decide a debit-style account is more what you’re looking for, Bartok said there are many good app options, including Greenlight and BusyKid. Both financial apps allow you to set up rewards for your children for doing things like chores or great schoolwork. They each promise to teach financial literacy through investing and teaching how a debit card relates to cash.
However, there is a fee associated with both. Greenlight ends up being the more expensive option depending on what level of plan you select. Bartok said you should not be deterred by that monthly fee.
“Emotionally and intellectually, it’s rewarding for the kid to know that, ‘hey, I can do this, and I don’t know how to put a price tag on that,'” Bartok said.
Bartok said teaching your children about finances early will help give them independence in the future.
“I just read an article this week that said 50% of kids, adult children, are currently being subsidized by their parents,” Bartok said. “I don’t think Riley will ever have to be subsidized. I don’t think my kids, my nieces and nephews who I’ve sat down and talked with and got them started, I don’t think they’ll ever have to be subsidized.”
When it comes to financial advice in general, Bartok suggests avoiding two key things.
“Parents and kids should avoid running up credit card debt,” Bartok said. “Credit card debt is a wasteland that oftentimes is almost impossible to get out of, and much like money can grow if it’s invested, so can debt, and when that debt spirals out of control, it’s a problem. The second thing I think parents ought to avoid is bailing kids out all the time. Whether they’re adult children or whether they’re teen children or college children, at some point there’s got to be some accountability, and my experience has been parents who are bailing their children out consistently, or creating an environment where the kid knows that’s not ever going to stop, they believe their behavior doesn’t really need to change.”
Both Bartok and the Carrolls recommend speaking with a financial expert to help guide you through financial decisions.