IT’S HARD TO IMAGINE, when your child is five pounds and 19 inches long, that one day he will be a responsible adult with friends, a college education, a job, strong opinions—and a credit score.
Getting to that point is part of the adventure of parenting.
Where to start? After getting our son’s birth certificate finalized and receiving his Social Security number, one of the first things we did was set up a 529 college savings account. There are 50 state programs to pick from, many states offer multiple plans and you don’t have to pick your own state’s program.
We live in North Carolina, but we opened an account with the state of Alaska. Alaska had selected T. Rowe Price Group to manage its 529. We had IRAs with T. Rowe Price, so it seemed reasonable to stick with a fund family that was working well for us. Each month, we automatically invested $100 in an aggressive stock fund, because we had 18 years to ride out the ups and downs of the stock market.
Why didn’t we select North Carolina? At the time, it had a poor selection of funds, and there wasn’t any state tax benefit for making an investment. Some states allow you to deduct 529 contribution from your state taxes. Since North Carolina didn’t—and still doesn’t—there was no reason to stay home.
What about teaching your toddler about money? That’s tough if a child is age three or less. Jayne A. Pearl, author of Kids and Money: Giving Them the Savvy to Succeed Financially, suggests that parents work money discussions into daily activities and games. Trips to a store, an ATM machine or a restaurant are wonderful opportunities to have discussions about how money allows your family to acquire items. It’s also a chance to talk about the values your family has: why you spend the way you do and how it’s important to save for the future.
Dorothy Singer, a retired research scientist at Yale University, suggests that coins are a good starting point for conversations with small children—making sure, of course, that they are not swallowed by accident. For instance, you might discuss how a dime is worth more than a nickel, despite its smaller size.
Once the names of different coins are second nature, you can start bringing products into the mix by allowing a child to exchange money for fruit or other interesting items. This may lead to some interesting discussions about what’s more valuable: two apples or two pieces of candy?
Alan Cronk retired after spending 32 years in the newspaper industry as a marketer, editor and writer at the Winston-Salem Journal. This is the first in a series of articles about his and his wife’s experience educating their child about money.