Good Money Habits for Kids to Build Wealth [2022]

They say youth is wasted on the young, but when you apply that to investing, the opposite is true. In fact, youth is on your side when it comes to investing. Developing good money habits early on in life is vital. It will set you up for financial success throughout your career and personal journey. 

If you begin when you’re young, time and compounding are your most important assets. Why, exactly? Well, compounding is the process of your money growing exponentially, or snowballing, over time. Say, for instance, that you put $1,000 into the stock market with the best stock apps, assuming a 6% annual return. That means that the following year, it will be worth $1,060, and the year after, $1,123.60. 

The benefits of compounding apply to virtually all families. Start contributing $10 per day to your child’s college savings account when they are one (assuming a 6% annual return), by the time they’re 18 they would have $119,655 saved. That’s real growth! 

Everyone Can Benefit from Compounding

For parents, one of the easiest ways to begin educating kids about investing is to make it fun and to look for teachable moments. 

For example, open a child bank account with a debit card for your child. Some of the best debit cards for kids and teens like Greenlight offer parental controls, investing options and savings goals development.

Another idea is to set an allowance for chores. Decide on a reasonable amount your child will receive each month for completing specific tasks. This will teach them healthy wealth building habits early on and incentivize them to work. 

Good Money Habits that Last a Lifetime

Since you still have to be 18 to invest in the stock market by yourself, you can overcome this hurdle by opening a custodial account. With a custodial account, parents can gift their children things like free stocks and bonds or real estate without major tax consequences. 

Custodial Accounts Act as a Gateway to Investing

I know what you’re probably thinking: Shouldn’t parents plan for retirement or make sure they have an emergency fund before saving for their kids? Contrary to popular belief, and even with the strain of the pandemic, parents’ number one goal is still saving for their children.

Kids Come First

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