In this post you will learn :
- Why kids should learn about stocks
- How to setup an account for your kids
Why kids should learn about investing
The main reason is that they can understand and investing is a skill that take a whole life to understand.
I like to tell my kids that there are only 2 ways of making money :
- Working to make money (like most people do)
- Have your money work for you.
My kids are now old enough (around 10 years old) to understand basic financial concepts. Unfortunately, this is not something they teach in school, so this has to be taught from somewhere. The fact that you're reading this blog means you're on a good track to learning more about financial independence.
I ask my son what is a product he really likes. And ask him what does it think every other kids will want to have. He picked a video-game. Unfortunately, I had to tell him there are only 2 types of companies (public and private) and he can only pick those that are public.
I also showed him the S&P index over 20 years, so he gets an idea on what to expect. The other important thing I want to show him is how to read a financial report, but we are not there yet.
There are lot of advantages of having your kids invest.
- The first 1000$ is free of federal income tax.
- You kid can invest in a Roth IRA, as long as they generate income.
In the next post I will go in detail about the tax consequences of having children that have earned and unearned income.
With E-trade, you can open a custodial account. The first 1000$ of income is has no federal income tax.
I also suggest you use Betterment to help you figure out your wealth. When it comes to personal finance, visibility is key.
They have amazing FREE tools.
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