Setting up an allowance for older kids
In continuation of last week’s conversation, The Lift’s Financial Planner Michelle Buria focuses on how an allowance is great tool for older kids too, using the same concept of spend, save, and share.
While younger kids get to see their allowance right away, pre-teens can be put on a weekly allowance, and teenager can use a monthly allowance. “That’s where you can begin to teach them about budgeting,” Michelle tells us.
Tip No. 1: Go see a banker
Teenagers should go set up both a checking and savings account. Instead of the jars that Michelle showed us last week, these kids will be allocating between accounts. Introduce them to ideas of interest rates and the wonderful world of online banking.
Tip No. 2: Contribute to a Roth IRA
As soon as a teenager gets a job, they should open a Roth IRA and start saving for retirement. “That’s really where you want to introduce them to your financial planner and illustrate what the contribution now will look like at a retirement age,” Michelle tells us.
Tip No. 3: Have a conversation about college expenses
College is a big expense on the horizon for many, you should talk about the cost of education and who will be paying for it. Visualizing the dollar amount helps a young kid to create a goal to work towards when they are saving.