Giving kids financial gifts

by Roger Sinasohn (Subscribe to Roger Sinasohn's posts) Dec 1st 2006 8:02AM

Categories: Money & Work, Places To Go, Media

Are you tired of your kids asking for money or toys? Have you told them more than once that it's time they got a job, even though they're not even in kindergarten yet? Well, CNN Money has some ideas for you. They've put together a list of "five gifts that will make your kids rich."

I'm not sure any, or even all of these are guaranteed to make your kids rich, but they certainly may help. I'm thinking that 'The Sims 2: Open for Business' may help teach some entrepreneurial skills and is certainly cheaper than the real thing, but I have to wonder how realistic it really is. I do know, however, that I want to set up a 529 plan for both Jared and Sara to save for college.

I have a friend who picks up recyclables whenever he can. When I complimented him on his environmentalism, he explained that it was for his son -- he takes the money and puts it away for him. "When he wants to start his own business, I want him to be able to fund it himself," he told me. That seems like a wise attitude. What do you think of CNN's list? What do you do to ensure your kids' financial futures?

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Comments (20)

Reader Comments (Page 1 of 1)

Damon 12-03-2006 @ 9:25AM

A Good idea would be to buy the game Cashflow by Rich Dad Poor Dad author Robert Kiyosaki. This game is expensive but it not only teaches your kids how to be successful. You might learn a thing or two your self.

marty 12-03-2006 @ 9:52AM

Teach them to buy and sell items such as bikes, toys, trading cards and allow them to make the decisions and mistakes themselves, also to reap the rewards and profits! Be sure to show them not to spend ALL the profit as they will need capital to move onto bigger and better deals!

Johestina 12-03-2006 @ 9:53AM

Get him government savings bonds.

kaufka 12-03-2006 @ 10:23AM

Teach your child that when they receive money like for birthdays, etc that it doesn't mean to go out and spend it. Set up a savings account so they can track their money and see it grow. Above all, set an example by not wasting money yourself and teaching your child about debt. Your child will become rich by watching you.

Dennis 12-03-2006 @ 10:49AM

What the Pro's DON'T WANT YOU TO KNOW, but what they do...

1st- Do not Use a 529 plan-It's a suckers bet..just put the money in either your IRA/Your Childs IRA or in a Taxable Roth or Taxable Account

2nd- Put the money? In A Top 10% - Past 5 yrs- Mid cap Fund or the Bruce Fund ( Wether it's $100 Yr or $10,000/yr )

3rd-Give each child the same- regardless of what they will do with it. Wether to go to college or start a business or Fund their Own IRA/Roth for buying a House or Retirement.

If every Parent(s) were to do this for their kids?
A. All would have enought to go to College, Go to a Trade School andor start their own business
B. All would have Twice-5x the money to buy a Home and/or Fund their Retirement..
C. Would Want to learn more about Savings/Investing and would Save More as a Result.

And tell them , when buying a home?
A. Only put down the Minimum and Take out $2,000/yr of what your P&I payments would be and put that $2k into thir IRA instead. Invest it into a Mid cap fund or a Reit ( or both) and they will not only Have Alot more money than just on the house, but Never will have to Use a HELC and pay Interest and can use the Mutual Fund if they ever need money..

And they won't end up broke, busted and a looser in life..Like 65% do by age 65.

Guy 12-03-2006 @ 11:08PM

To Dennis re: what the Pro's DONT WANT YOU TO KNOW, I have 2 kids and need some suggestions please e-mail me at yugsy@aol.com . What your saying makes a lot of sense

Guy 12-03-2006 @ 11:09PM

To Dennis re: what the Pro's DON'T WANT YOU TO KNOW...please e-mail me at yugsy@aol.com , your suggestions are great however our situation is not the norm

Chelsea 12-03-2006 @ 12:52PM

If you want to have a yard sale, put your kids in charge of it. Put it as, "Guess what? I've decided you're old enough to run the yard sale!" rather than as a chore. Let them write down prices, arrange items, and find themselves a cashbox. When you're done, split the profits evenly among them (and take an equal share for yourself; helps with Christmas presents). I know everyone realized this, but I have to say it: make sure you're present whenever people are around. Also supervise pricing, and give tips: Clothes are worth less than ten percent of what they were worth originally, and everything else can be cut to half or a quarter.

Then let them decide what to do with the money. Present it to them as their salary for running the yard sale.

Ericka 12-03-2006 @ 2:05PM

My 5 children all have a savings account. They put in 10% of their allowance or more if they want. I told them when they are 18 they can transfer it their own account and do as they wish with it.
When they were little the loved the feeling of being big, making a deposit. Now the oldest is 16 and has over 2500.00 saved (she now has a job and puts in 10% of her check) and is saving for a car. My youngest is 7 and he has 317.00 saved...he puts in money he finds from 11 cents in the road , to 2 dollars he won from a bet from his big brother. It adds up and they are learning how to save...and they like it! They love the bank statement that comes to each of them every month.

Ron 12-06-2006 @ 2:37AM

I have 7 children and have taught them all from the time they could could earn money to work and get paid but also to work and not get paid. It is important for both principles to take effect in there lives as early as possible. In the end when they have grown up and start off on their own in the world they would have already gained both skills that are intergral in maintaining a happy and sucessful life style. Giving free unconditional Service to your fellow man is even more important then making a living, however for a man, He is worse then an infendel if he doesn't provide for his family adequately! Getting rich is not the point of Earthlife. It is being sucessful both spiritually and humnanly. Greatness is not measured by money, it is measured by how many true friend you have and what your personal legacy is. Scrouge was rich but he failed in the most important area's of life until he changed and humbled himself. This is a story not to be taken lightly. However waiting to the end of your breath is not what is expected of us. We need to develop the giving skills from the beginning in the family unit and in the Church of Jesus Christ where all these traits are honed. God Bless our little ones and Wo unto any that hurt them by not teaching them these principles of righteousness and humanity.

Ann 12-06-2006 @ 5:55AM

Some of the ways I teach my daughter about money is thru comparisions. I own a moderately priced car and when she was smaller if she would see a high dollar item car, house etc. I would compare my car to the item. Example, that "whatever " is 5 of my cars.
My parents also purchased moderately priced stock with a reinvestment option when she was born, so now at the age of 12 she checks the statements and invests some of her own money back into them.
Another thing I did, was gave her $20.00 at a well known amusement park so she could buy an item as a remembrance of the occasion but once it was gone it was gone. That day we did alot of comparisons in the gift stores.

Kimberly 12-06-2006 @ 6:39AM

One thing I learned as I was growing up, is that, the harder and smarter you work, the more and the better the profit. We were farm kids. We each had our "own" acre of tobacco that we were in charge of. Daddy made sure we had all the help and supplies we needed to have a successful crop. At the end of the year when it was time to sell our crop, he gave us the above cost profits off the acre we grew. We knew the sweat and hard work that went into that and saved our money as long as we could. By the time I was 18, I had saved enough to buy the vehicle I wanted and to be able to strike out on my own. I'm am trying to pass the same ethics and beliefs to my children. We no longer farm the land ourselves do to Daddy's health, but I have my own little business that I run out of my home. My oldest is 10 and he helps me. For every item he sells he gets the above cost profit. He has a nice amount in his savings now and by the time he is 18, he'll have a nice amount of money to put towards what he wants to do in life. I think there is no better way than to have hands on experience and knowledge. He is earning his future. And he knows this.

James 12-06-2006 @ 6:48AM

I have set a 'matching goal trust' for my three children. They will receive (after age 21) the gross amount they earned for that year. If they earn $20,000-I match $20,000. If they earn $200,000 - I match $200,000. The sky is the limit. I was fortunate but lacked some goals early on in life as money and finance was just not spoken about in our home. My wife and I speak about it as easily as we do what happened during each childs day. It is a reality of life that financial security can allow for greater growth in ohter areas of life. They will be readily available to pursue spiritual, athletic and travel interests.
And coincidentally, all three earn top honors in school and sports. We speak of the ultimate success in terms far beyond getting...it is ALL in giving back. I have also found the best preparation you can give a child...your time, trust and experience.

A. Vaerst 12-06-2006 @ 12:29PM

Speaking of savings. I do this and it works out so far for my five year old. He gets an allowance $5.00 a week right now. Half of the allowance goes right into a savings jar that we take to the bank about every other month. Then 1/2 of what is left (so $1.25) goes to Church and the other $1.25 goes into his wallet. If he wants something then he needs to use his money out of his wallet. When he realizes that it will use up all of his money or most of it he usually does not want the item any more.

Paul 12-06-2006 @ 1:38PM

It's nice to want to do this, but many families out there are just struggling to survive to put food on the table and a roof over their heads. Gifts are a luxury many pray to get for their kids, yet many will not be able to do it.

If these parents out there had a way to survive and then teach their kids how to save I'm sure they would. Most they are showing their kids is that this is a life they do not want when they grow up, but they typically fall into that trap because nobody out there spends the time to guide these kids on the right path to a career and future that will make sure they won't wind up like their parents.

All these kids see is a cycle of poverty that they don't believe they can escape from. Few will escape and our own government couldn't care less. We pay more attention to other countries that want to kill us than our own people here!

Steve 12-06-2006 @ 3:26PM

Aside from giving money away to their favorite synagogue, church or charity, children should be taught to save as soon as they start earning money. Albert Einstein said that the value of compounding interest is the most powerful financial tool...and he was right! As soon as my youngest child started making money doing odd jobs (mowing the lawn, taking out trash, etc.), I opened up a savings account and made her put half of her earnings in it. I told her I'd match her contributions once her savings grew to $1,000. That was 6 years ago. Now she is a Freshman in college and has more than $5,000 in her account. (I do the same thing for her younger sister.) She works over Winter Break and every Summer and I still match her savings. In June, she is going to Italy for a month to study and travel. I agreed to pay half. Meanwhile, she recently opened a Roth IRA and is expecting to accumalte several hundred thousand in tax-free dollars for her retirement (in 40+ years).

Neal Sccrotom 12-06-2006 @ 3:08PM

What about getting your children a job making sweatshirts, oh say...when they are about six or seven and taking one half of everything they make and saving it for them in an undisclosed location. This way you'll have something for them when they start college.

Pete Narveson 12-06-2006 @ 4:02PM

A tip for the grownups - Get rid of the plastic. Buy only what you can afford. Not talking about houses or cars, just the junk you want and cannot afford such as TV's and such. If you cannot pay off the card each time it is due, don't charge it. You will be suprised how much you save.

Stacey 12-09-2006 @ 5:21PM

I am not sure why Dennis does not recommend a Section 529 plan. First of all, it is easy to set up and readily available from virtually all financial institutions. Some employers even provide it as an optional benefit. Unlike an IRA, the annual and overall limits are extremely high. I will never be able to "max out" on this plan for my kids.

The biggest benefit is all earnings are tax free, similar to a ROTH IRA. Of course, a 529 plan is based on the presumption that the money will be used for college. There are penalties for other distributions, but there are penalties for IRAs and other investment vehicles none of which allow you to utilize earnings tax free except a ROTH. The ROTH IRA, however, has strict income and annual contribution limitations and a 529 plan does not.

If you set up an account and the beneficiary decides not to go to college, you can simply change the beneficiary. You can set up an account for absolutely anyone, including yourself. My parents have 529 plans for my kids and contribute monthly.

Most financial institutions have age-based investment portfolios for these plans, so you can invest based on the child's age. For example, if you set up a plan for a 3-year old, it will be invested in more high risk, higher return instruments than if you set up a plan for a 15 year-old who is closer to college. Most financial institutions charge little or no fees if you contribute about $25/month. Fidelity just lowered the monthly amounts. If you are contributing monthly, you can also add more to the account whenever you want. So, if you got a big bonus, you could do a one-time $5K contribution, etc.

There are always a variety of investment choices. As far as specific plans devised for higher education, this is by far the best in my opinion and should not be overlooked. I started investing in 529 plans for my kids the month they were born.

Stacey, CPA
Tempe, AZ

Maria 12-07-2006 @ 7:32AM

Paul,

I have to agree with you. I am on the poor side and it is hard for my kids to understand the improtance of saving money. My family never talked about money when I was younger but I have learned to survive and try to save for my kids. Since my daughter started working, she has been able to buy the things I will not and save a little money. My son on the other hand has a hard time when he gets money.