This holiday season, don’t buy your loved ones gadgets and junk they’ll eventually hide in a closet. Give a gift that will last a lifetime: share a gift of financial literacy. This is especially true when it comes to kids. Did you know that 94% of grandparents provide some form of monetary help each year, spending an average of $2,562 annually on their grandkids?
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Whether you’re a grandparent, parent, aunt, uncle or a close friend of the family, use the holidays to sprinkle in some education to help our younger generations better understand finances. There’s no doubt it’s needed. A new report by the TIAA Institute and the Global Financial Literacy Excellence Center (GFLEC) at the George Washington University (GW) School of Business found all five generations, especially Gen Z and Gen Y, struggle with financial literacy, have trouble meeting monthly financial obligations, and even have difficulty making ends meet to some degree.
Luckily, there are several ways to help our younger generations turn things around. Here is a list of gift ideas to help teach financial literacy.
1. Bring back the lemonade stand: Teaching your grandchildren about businesses can set the precedent for the next 40 years of their life. Even something as small as a bake sale can put the idea of money and saving into their minds. Plus, working for themselves will help them appreciate the value of a dollar.
2. 3 envelope rule: Teach kids to use the following envelope rules for cash gifts: one for saving, one for sharing with others and one for spending. Be sure to educate them to figure out if a future purchase is a want versus a need. It’s the holidays, so make sure each envelope has cash in it.
3. Bring grandchildren to financial meetings: If it’s okay with your financial advisor, bring some little ears to your meeting so they can learn about general investing, finance, and savings. Professionals can plant the seed of “financial literacy” and can encourage open communication and educate them about their future finances.
4. Contribute to a 529 college fund: A 529 plan, legally known as a “qualified tuition plan”, offers tax-free investment and withdrawals for approved expenses like tuition, books, room and board. In some states it can provide a tax deduction for the contributor for multiple years worth of contributions. A parent or grandparent can give up to $15,000 annually without having to file a gift tax return.
5. Open a simple and inexpensive investment account: Encouraging a child to open an investment account with you as custodian to fund on a monthly basis is another wonderful gift. Investing a small amount on a regular basis can pay off exponentially in the future!
6. Teach them the basics of taxes: Even though taxes are only filed once a year, it’s important to understand them well before April 15th. While the best way to teach kids about taxes is to eat 30% of their ice cream, you can also charge “income” tax on their allowance. Give them an allowance over 12 months and take the opportunity to teach them about the basics of taxes, saving, and investing.
Much like the old adage about teaching a man to fish and eating for a lifetime, teaching your loved ones a life skill as important as financial wellness can reap a lifetime of dividends.
Author: Jake Guttman, FSCP, is the founder and CEO of Rosevest Financial that provides a variety of services including financial, legacy, investment and retirement planning, as well as risk and wealth management. For more information visit rosevestfinancial.com. Securities and advisory services offered through Geneos Wealth Management, Inc. Member FINRA/SIPC.
