Wednesday, February 1, 2017

Offer Kids A Savings Match With Strings Attached

Matched dollar bill faces.

“I sure wish I had taken advantage of my employer’s 401(k) match!”

Sound familiar? It’s a regret uttered by countless aging adults grappling with financial reality. They missed the money boat.

Don’t let your kids miss the same boat. Condition them to recognize and seize one of life’s rare free money opportunities: the matching contribution.

Set up a family savings match opportunity, so your kids recognize the benefits early on. Here are a few angles to consider:

  • Set terms. Real matching scenarios aren’t completely free. They come with strings attached: no touching the money until a certain age, early withdrawal penalties, qualified spending restrictions. Make sure your matching scheme includes similar restrictions. “To get this 50% match, you can’t touch the money until you get your driver’s license. After that, the funds can only be used for car expenses like gas or repairs. If you pull the money out early for something else, you’ll forfeit all the parent matching contributions that were made.”
  • Interest versus match. If you’d like to encourage everyday saving for less restricted purposes without all the strings attached, try parent-paid interest instead. See how that works here.
  • Engage grandparents. See if the grandparents would be interested in matching the grandchildren’s savings contributions. Explain what you’re trying to teach your kids. Many grandparents will leap at the opportunity to connect with grandkids over personal responsibility topics like financial literacy.
  • Consider a Roth IRA. If your teen earns W2 income through a summer or part-time job, look into setting up a Roth IRA and offering a matching contribution (within eligibility limits). To see what I’ve done with my teens, see here. It could be a million dollar opportunity.

How much should you match? That’s entirely up to you. Curious what other parents are doing? The most popular matching deals currently offered by parents on our family finance site are: 100%, 50% and 10%.

But, hey, it’s free money. Any match will do.

Here’s what really matters: someday when your kid’s first HR rep asks, “Would you like to take advantage of the company match?”

Your kid will chuckle, “Of course! I've been taking the match deal since I was 10!”

No regrets.

Want to turn these tips into action? Check out

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