According to a CNBC/Acorns survey, 83% of U.S. adults say it’s parents’ responsibility to teach their kids about money, but 31% of American parents say they never talk to their kids about money.
Last week, the topic was covered on Northwestern Mutual’s podcast, “A Better Way to Money,” featuring social media star and Star Drinks owner Kat Stickler and Northwestern Mutual vice president and chief portfolio manager Matt Stuckey.
“I love and respect my parents, but we never really talked about money. I never saw them talk about money,” Stickler told Stuckey during the conversation. “It was taboo. It was never a topic that came up.”
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Stuckey says parents can teach their kids strong money management skills just like any other good habit.
“You just have to keep repeating things like saving and investing,” Stuckey says. “You’re not going to teach a 4-year-old about investing, but you do want to introduce the idea that if you save a dollar, you can put it towards something you really want in the future. That takes time to develop.”
While money may not have been a topic of conversation when Stickler was growing up, the entrepreneur said her mother taught her the value of money in other ways, like transforming old jeans into shorts and turning empty butter tubs into school lunch containers.
In addition to talking to their children about money, parents can also lead by example in making wise financial decisions.
“Becoming a parent now comes with new risks,” Stuckey said, “like what if something happens to me, what if I can’t work, and how that will impact my children’s financial well-being.”
Part of getting through all that uncertainty, Stuckey says, is planning for big purchases. Stickler, who has a young daughter, says she’s already taken important steps to secure her future, including creating a will with a month-by-month timeline and setting aside funds for medical expenses, school fees, as well as clothes and toys.
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Stuckey said parents should use today’s circumstances to set themselves up for success tomorrow.
Stuckey recommends setting up a 529 that you can contribute to for education, as well as a Roth IRA for your children.
“[With a Roth IRA]you can contribute on your child’s behalf up to the amount of their earned income or the current contribution limit of $7,000, and then withdraw the money tax-free after age 59 1/2 or when you need to use it for a qualifying life event,” Stuckey explains. “It’s a way to support intergenerational wealth while also preparing for your child’s retirement.”
Stuckey says parents can also consider a Unified Transfer Account for Minors (UTMA), which is an account that has no limits on the amount of money that can be deposited and allows parents to maintain control until their child turns 18 or 21, depending on where they live.
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Finally, Stuckey recommends an “often overlooked option” for your children: permanent life insurance.
“As long as you pay the required premiums, the policy will eventually pay a death benefit,” he explains. “Plus, the policy accumulates cash value, which your children can access while they’re alive.”
