Thursday, March 30, 2017

Fully Fund Your Working Teen’s Roth IRA

Teen holding free Roth money from Mom and Dad.

Did your teen pull down a paycheck last summer or during the school year?

Then, it’s time for you to establish a Family 401(k).

Here’s the quick recipe:

  1. Open a Roth IRA account for your teen (custodial account if under 18).
  2. Contribute up to the max possible. That’s usually the total of what your teen brought home since most earn less than $5,500 (or whatever the current IRS Roth contribution limit is).
  3. Invest in a low cost index fund. VTI is my personal go-to choice.
  4. Review, rinse and repeat each year.

Decades from now, your adult child will be sitting on a sizable nest egg — even if your kid falls off the contribution wagon during young adulthood. Compounding over the long haul is that powerful.

But there’s one big problem, you say.

It’s step #2. Your teen already blew all those paychecks on fast food, online games, and streaming music. There’s no money left over to contribute.

Now what?

Just gift the contribution money to your teen. If you can’t cover it, hit up the grandparents, aunts and uncles.

Huh? Why should you just hand over free Roth contributions to your teen? Isn’t that sending all the wrong messages?

Not in my book. Think about it.

Even if you as the parent gift the entire contribution, here’s why it’s a neat way to pass money to your kids while signaling all the right messages:

  • It’s contingent on getting a job and bringing home a paycheck.
  • It shows the power of patient investing and tax free growth.
  • It’s a great excuse to talk to your kid about investing every year.
  • It increases the probability your child will quickly jump on future matching opportunities, like an employee 401(k) plan.
  • It puts your kid solidly on the path to a financially independent future.

The bottom line: funding (and even fully funding) your teen’s Roth IRA now is a lot healthier than plopping a large lump sum in your kid’s lap later when you kick the bucket.

Want to turn these tips into action? Check out

Wednesday, March 22, 2017

Cut Your Kid In On A Share Of The Coin Jar

Coin Jar With Share Note From Dad

While researching anonymous transaction data on our family finance site today, I stumbled across this delightful deposit for a 7 year old:

03/20/2017 $8.62 For counting Dad’s coins

I love it! Use your spare change jar to creatively engage your youngster in some personal finance basics.

Offer your kid a deal. If she stacks your spare coins into neat little $1 piles, you’ll let her keep a hefty share.

Convert her piles into crisp dollar bills, or deposit the equivalent sum right into her account.

She’ll be surprised how much money accumulates in a change jar over time. I bet $8.62 was an exciting windfall for that 7 year old.

It’s an important personal finance lesson: even micro savings can add up to significant sums over time.

In fact, if the sum is anything north of trivial, encourage your child to split the bounty between spend, save, and give buckets. (See tips on choosing the right percentages here.) Separating funds into purpose-driven partitions is an effective money management technique. Help your child form the habit early.

So, don’t let your change jar just sit there collecting coins. Use it to dispense some valuable financial wisdom to your kids.

P.S. Got teens? Try setting up a swear jar, and let the proceeds flow to the family instead!

Want to turn these tips into action? Check out

Wednesday, March 15, 2017

Audit The Household Utility Bill With Your Kids

Kids Running Through Water

Quick quiz. Which utility costs your family more?

  • Water,
  • electricity,
  • gas,
  • garbage/sewer, or
  • cable/Internet?

Yeah, I wasn’t quite sure either.

I actually thought water would top the list since we’ve been living through a severe multiyear drought in our area. Nope. Electricity and the cable/Internet combo are neck and neck at the top. In fact, our combined sewer/refuse charges are more than double our water cost!

And most kids probably don’t realize all those things cost anything at all.


Ummm. Because you never told them!

The next time your utility bill arrives. Call the kids over. Ask them to guess how much each utility costs. Reveal the numbers. It can be a real eye opener.

If your utility bill is like mine, it actually has some pretty interesting details inside. The data and charts make good fodder for a family finance discussion.

I can see the monthly usage trend for electricity, gas, and water over the past year. One stays fairly flat. One dips in the summer. One dips in the winter. Challenge the kids to explain the seasonality.

I can see a usage comparison to the previous year. Electricity and gas are up from last year. Water is down. Why? What can we do as a family to reduce usage? Do we really need every light on in the house? Can we wear our sweatshirts instead of cranking the heat?

I can see the average daily cost for each utility by month too. How do the daily tallies compare with what your kids make in weekly allowance or odd job payments or birthday checks? How does the monthly total compare to your teen’s summer job earnings? Those comparisons will get their attention.

You and your kids might be wondering how your utility costs compare to what others are paying. Check out Numbeo to look up costs in your area. shares stats for typical US families in Utility Bills 101. How does your family stack up? Are there logical reasons for exceeding the averages?

If the utility audit bores your kids, there’s one sure-fire way to get their attention. Propose divvying up the bill and charging each kid for their fair share like we do with our cell phone data plan. Suddenly, utilities just got a lot more interesting!

Interested or not, your kids will at least be more informed. It’s important to know that the everyday basics we often take for granted cost money.

After all your quick quizzes on the utility bills, your kids will be more prepared for the big test someday: venturing out on their own financially.

Want to turn these tips into action? Check out

Wednesday, March 8, 2017

Pick An ETF To Make Investing Lessons Fun And Smart

Child holding Disney egg from basket

The classic way of teaching kids about investing is all wrong. Sure, owning a share of Disney (or some other favorite company) makes investing familiar and interesting. But it’s a dumb investment strategy.

The smart investment strategy is to buy your kid a low cost, broad market index fund. But that’s pretty abstract and boring.

That’s why I’ve suggested setting up a competition between a familiar stock and an all-market index fund to get the best of both worlds — like my son’s competition between CMG and VTI.

But a dad named Allyn offers a simpler way to keep investing lessons fun and smart. Here’s what he did with his daughter:

“Just a month or so ago she started with her first ‘investment’ in FDIS (with her own money and a ‘matching grant’ from her parents) as it holds pieces of the few companies she knows by name and likes (most notably Disney and Apple).”

Brilliant! Buy an ETF containing a basket of familiar stocks instead of betting on a single favorite stock.

The top 10 holdings in FDIS right now are: Amazon, Comcast, Home Depot, Walt Disney, McDonalds, Priceline, Starbucks, Time Warner, Nike, and Lowes. Most of those are names your kid can relate to. And, the expense ratio of FDIS is nice and low at 0.084%. Diversified. Low cost. All great investing messages for your kid to absorb.

If your kid has a specific interest, you might be able to find a decent targeted ETF to match. Gaming enthusiast? Maybe GAMR. It’s smarter than just picking one gaming stock. But be careful. The more narrow, the more risky. Keep an eye on the expense ratio too.

So, pick an ETF instead of a single stock to teach your kid about investing. You get familiarity and diversification all in one neat little package.

That makes your child’s introduction to investing both fun and smart.

Want to turn these tips into action? Check out

Sunday, March 5, 2017

Make Saving Money Right Again!

William Shatner Video Thumbnail

Our Micro Money Message series delivers favorite family finance tips in a quick video format. Each one is designed to help you encourage your kids to adopt responsible and thoughtful money habits.

Here’s a listing of the first 35 episodes:

  1. Take Your Time With Money Decisions — Help your kids avoid hasty money decisions like silly purchases or risky investments.
  2. The Two-Way Power of Philanthropy — Challenge your kids to a random act of helpfulness this weekend.
  3. Luck And Work Go Hand In Hand — Show kids the relationship between luck and work.
  4. Know Your Money Leaks — Teach kids to mind their little money leaks so they can keep their financial boats afloat.
  5. Tell Your Dollars Where To Go — Show kids how to tell their dollars where to go rather than asking where they went.
  6. Own The Whole Market — Picking individual stocks is like finding needles in a haystack. Instead, follow this simple recipe for getting your teens in the investing hunt.
  7. Use a Hybrid Card Strategy — Credit cards build a credit history, but they don’t prevent debt. Prepaid cards prevent debt, but they don’t build a credit history. So which one is best for your older teen?
  8. Spark The Independence Flame — A simple recipe for sparking the flame of financial independence within your child.
  9. Let Kids Choose The Spend-Save-Give Allocation — How to help your kids strike the right financial balance.
  10. Prompt the Philanthropy Discussion With Great Quotes — Make philanthropy a regular part of your kid’s vocabulary and give that Giving Jar a whole new meaning.
  11. Convert Prices To Work Units to Teach Kids The Value Of A Dollar — A simple way to make kids appreciate the value of a dollar.
  12. Use The Rule Of 72 To Turn A $20 Birthday Check Into $1,280 — The Rule of 72 is a great way to teach your kids what money invested today could be worth in the future.
  13. Play The Sweep-To-Savings Game With Your Teen — An easy way to gamify frugal spending habits with your teen.
  14. Reward Your Kids With Mom/Dad Dollars — Paying for chores can be an expensive and questionable proposition — unless, of course, you’re printing your own money. Here’s how and why to do just that.
  15. Give Your Teen Cash Back Rewards For NOT Spending — What’s in your teen’s wallet? Here’s how to deliver a parent-financed cash-back bonus card that rewards your teen for NOT spending.
  16. Run A Family Banking System With Prepaid Cards — Prepaid cards are excellent financial training wheels for your kids. Here’s how to set up a family banking system with prepaid cards that teaches your kids good money habits without the risk, hassle, or hidden fees of credit cards and bank debit cards.
  17. Put Some Pain In Your Kid’s Cashless Payment — Here’s how to put a little “pain” in your teen’s cashless transactions to foster cash-like spending habits. No pain, no restrain.
  18. Add An Emergency Fund To Your Kid’s Money Bucket List — Why wait until your kids leave the nest to teach them how to take the first baby step out of financial distress? How to introduce your kids to emergency funds now.
  19. Teach Kids A Simple Secure PIN Strategy — Kids struggle with proper PIN management. Here’s a simple recipe you can teach them to create and remember secure PINs.
  20. Use Reimbursements To Teach Teens The Value Of A Dollar — Make teens active participants in the everyday expenses you’re picking up. That way, they’ll know — and appreciate — the real value of a dollar when the day comes for everything to be on their nickel.
  21. Make Kids Journal Their Money Requests — Here’s another way (aside from a budget-based allowance) to put the brakes on impulsive extra money requests from your kids.
  22. Tell Teens To Take More Risk — There’s one area where teens need to pump up the risk if they’d like to enjoy a healthy future: investing. This video gives parents a recipe for getting them started. It’s called the Family 401(k).
  23. Make #GivingTuesday Your Kid’s Annual Habit — Here’s a recipe for instilling a philanthropic habit in your kids by anchoring it to the annual event known as #GivingTuesday.
  24. Turn Why Into How When Kids Whine About Money — How to turn whining into problem solving when your kids want to buy something.
  25. Hold Teens Accountable For Big Fines With A Parent Payment Plan — When teens incur bigger fines than their accounts can handle, parents often pick up the tab. Here’s a better solution.
  26. Nudge Your Kid’s Charitable Impulses With Giving Data — How much are your kids allocating to charitable giving? This data might be just the nudge your kids need to up their charitable games in the new year.
  27. 6 Reasons To Stop Giving Cash To Your Teens — Are you still handing cash over to your teens? Here are 6 reasons to replace the dollars with a card. Get clean, safe, transmittable, tracked, online, and real with a prepaid card instead.
  28. Make Kids Pay The Sales Tax — Kids often don’t have a clue about how much things cost or that sales tax even exists. Here&rsquos a clever and affordable way to make your kids mindful of both.
  29. Let Kids Gift Service Bucks Instead Of Stuff — If you want your kids to be thoughtful gift givers, but you don’t need any more stuff, here’s a solution.
  30. Set Up A Smart Competition To Make Investing Lessons Fun — Betting on a favorite stock is fun but stupid. Buying an index fund is smart but boring. So how do you make smart investing lessons fun for kids? Here’s one way.
  31. Try A Use-It-Or-Lose-It Allowance For Obsessive Young Savers — Some kids have a spending problem. They don’t spend at all. Here’s how you can help a young obsessive saver loosen up the purse strings a bit and enjoy money instead of just hoarding it.
  32. Bill Kids Weekly For Their Share Of The Best Deal — Here’s how you can pay for your kids’ up-front or family subscription plan to get the best deal while still holding them accountable for their fair share.
  33. Offer Kids A Savings Match (With Strings Attached) — Encourage your kid to save by offering a matching contribution, but attach some strings to send the right message.
  34. Reward Your Kid With A Spot Bonus Today — A spot bonus is a great way to brighten a kid’s day. Here’s what other parents are doing.
  35. Encourage Kids To Be Name-Callers When Saving — Teach your kids that name-calling is a bad habit, except when it comes to saving money. Here’s why.

Episode 36, Make Saving Money Right Again, just went live. Check it out.

Here’s the transcript:

Hey, Bill here. As always, thank you for the nice mentions on social media.

A recent survey of 7,000 American adults found that 34% had zero dollars in a savings account.

And, a whopping 69% had squirreled away less than $1,000 in savings. That’s worse than 62% the year before. American adults are trending in the wrong direction on savings.

It made me wonder how our kids are doing.

So, I ran some numbers on

Here’s what I found: in a sampling of 6,515 kids, 44.3% had zero dollars tucked away in a separate savings account. That’s about 10% worse than the adult survey stat.

We can do better.

If you need some ideas, stop by You’ll find tons of my favorite savings tips for kids of all ages.

You know, William Shatner has one of my favorite savings quotes: “If saving money is wrong, I don’t want to be right.”

But, hey, let’s make it easy on our kids. Let’s make saving money right again. Then, we can reverse the savings trend for the next generation.

Want to turn these tips into action? Check out