by Dana George | Published on Sept. 1, 2021
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Why not use the Child Tax Credit to help your children prepare for their financial future?
No matter how many children you have or how large a Child Tax Credit is deposited into your checking account each month, it's possible to use the money to teach your kids about finances.
While monthly payments toward the advance Child Tax Credit are scheduled to end in December, President Joe Biden has called to extend them through at least 2024. And a growing number in Congress are floating the idea of making them permanent. Whether the monthly deposits end later this year or continue, this is the perfect time to help your children become financially knowledgeable.
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No matter the age of your children, a monthly meeting to discuss financial issues is a good idea. The truth is, many young adults leave home with little to no financial knowledge, and a quick meeting once a month is enough to teach them the basics. Maybe your parents (and grandparents) never did such a thing. Still, when you consider that 4 in 10 Americans face financial challenges following the pandemic, you realize that every bit of economic confidence you can instill while they're still living at home can benefit your children when times get rough.
There's no reason to tell your kids how much you earn each month, particularly if they're young and might decide to tell everyone they know. You can share how much you're receiving in Child Tax Credits, though. After all, millions of people receive precisely the same amount.
Tell them what you're doing with the money, whether it's covering everyday expenses or paying school tuition. If you're splitting it up to use for different purposes, you have the perfect opportunity to allow them to participate in the decision-making process.
Sounds silly? It may not be. A survey conducted by Charles Schwab found that 86% of 16- to 18-year-olds would rather learn about money management at school than make real-world financial mistakes. But as of early last year, only 21 states required high school students to take a personal finance course. That leaves millions of kids with no formal financial education. If they don't learn about money at home, they go into the world primed to make mistakes.
Many of us had parents who refused to discuss money in front of us for fear of exposing us to adult responsibilities before we were ready, and many of us had to learn the hard way.
Naturally, if you tell your children that you're broke and the sky is falling, they are probably going to be stressed, even if they don't show it. These monthly meetings are not about exposing your kids to adult problems. Keep it positive and remember they're children. Let them know how much money you're working with and help them understand it may be temporary. Finally, ask for their input. You don't have to take their advice, but ask them to explain their reasoning even if you disagree with their ideas.
Asking for their ideas is a great way to open up a conversation. It's all about inspiring them to think about money and how they would manage it if they had the chance.
Let's say you're receiving $500 per month but only have $400 of it earmarked. Consider allowing the children to decide how the final $100 would benefit the family most. See what they come up with. You may be surprised.
Make it a serious discussion, even if they're silly. Steer them toward ways money can help them feel more secure (like building an emergency savings account) or how it can benefit their future (like investing in a brokerage account).
And when they do come up with an idea that will benefit the entire family, allow them to play a role. That may mean going with you to the bank to open a special savings account or learning how compound interest works by purchasing fractional shares of stock (for as little as $5).
It's possible to make learning about money fun. For example, these financial literacy apps teach money skills in a new and clever way (without anyone realizing they're learning lifelong skills). You know your children best, so you can choose an app that fits their interests, learning style, and attention span.
For example, the Family-at-Home Financial Fun Pack is free, and it's loaded with fun ways to teach your kids (of all ages) about finances without bogging them down.
These monthly meetings may begin because there's a Child Tax Credit coming each month, but there's no reason they have to stop. We teach our kids about everything else, from being kind to how to change a car tire. Why not prepare them for real life by also teaching them to take control of their finances?
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