Teaching Kids About Financial Responsibility

Teaching kids about UTMA and wealth requires gradual financial education, not just revealing large sums early.

### Teaching Kids Financial Literacy and Preparing Them for Wealth
* 🎓 " Make sure you prioritize your own **Financial Foundation** before making your kids **super wealthy**.
* 🎁  Start teaching kids about money early by creating life experiences and encouraging them to **work, save, invest, and give**.
* 💰 " Once you get to a certain level of saving, start teaching how **scarcity and the resource of money works** so your children can be **good with money, not just have money**.
* 🌱  Introduce financial concepts to kids gradually as their financial maturity grows, starting with basic concepts like **compound interest**.
* 🏦 " You don't want to squander the opportunity to create financial mutants who understand how to **use money as a tool**.
* 👦 " I wouldn't start the conversation and say, 'Hey, son, daughter, just so you know, **a million dollars is waiting for you when you're 21**,' because that might paint the wrong picture."

[Music] Absolutely, we've got the questions coming in. So I'm going to kick it off with Calvin's question. It says, When would be a good time to tell kids about their UTMA? By the time he's 21, it'll be about 250k. How should we start this discussion early and train him thinking about it in the right way? Two that 200 50K by shoot I hope what that means is that Mom and Dad's portfolio is real big real right. One of the things we always tell folks, parents, is make sure you prioritize your own Financial Foundation before you start making your kids super wealthy. And I'd argue an UTMA that's going to be worth a quarter of a million dollars at 21 is pretty powerful. So I actually have some experience on this. I have a daughter who's over the age of majority in the state of Tennessee. See, that is the problem with UGMA's is that whatever the age of majority in your state is, your children actually will own

that account now hit that age. You still have some strings of Life. Assuming that you tell your kids, Hey, you like this, behave and don't be responsible with this. This is not your start a Ferrari fund. Um, you know, that is a risk, especially somebody who's going to have $250,000 saved up. Um, I hope for somebody who is saving this much, Calvin, that you're actually creating some life experiences along the way. Where when I, I, I'd encourage get your kids to work in high school. I love the discovering that people actually enjoy work. Work can be satisfying despite what we're told out there in society. I think learning to what you can do with work. And then once your kids start earning money, prime the pump of saving and investing and also giving. You know, there's nothing wrong. Bo does a great job of modeling that with his kids with the give, save, um, spend. I like you what I forgot is I couldn't think. So what, what, what the four hours of sleep spend, that's right. We spend some of our money.

but it's one of those things where once you get to I know with my oldest um because realize she started working when she was 15. We opened up her custodial Roth IRA that year, and I'm going to tell you a side effect that you don't realize when you set up those online accounts with like Fidelity. If they have their ugma accounts there with their social security number when you set up that online custodial Roth IRA and you and they download the Fidelity app, guess what's going to be front and center when they go and they log into their Fidelity app. Is you're going to see not only that custodial Roth you set up for them, but because it's tied to their social security number, there goes see that ugma account that you also set up. So that's why it's important to also get the behavior of teaching you know how scarcity and how the resource of money works so your children can be good with money not just have money because that's the problem.

when you look at um lottery winners, professional athletes, and others, you go, how do these people that come into these large sums of money that should be more than enough for the rest of their life, why does it always fail? and it's mindset and it's the training of how to actually use money as a tool, not the center of the universe, but the tool that it is, and a lot of times I think that's skipped with, unfortunately, people when they come into money. Yeah, it's interesting, the question, Calvin, is, you know, when do I tell my kid about the, in my opinion, I don't think that's the first conversation that you have. I, I was having, I had a call with an individual this past week, uh, and this family has done very, very well, and they have a daughter who is, um, 17 years old, and we were talking about like, hey, okay, you know, we're doing our Estate Planning and we're thinking about that and we want to begin to bring her into the conversations, and I just said, hey, here, here's what I, I don't know how the, the

conversations you've had prior, but I wouldn't throw them right into the deep end initially. Not, not at 17 years old. I would introduce them to Concepts, and I think for parents, we can do this all through our child-rearing ages. So when kids are little, like my kids, you introduce them to give, save, spend, and then you introduce them to a savings and checking account. Then you introduce them to a Roth IRA. And then what you begin to do is you slowly begin to spoon-feed them with information as their financial maturity is ready for it. I don't know that I would start the conversation, Calvin, and say, Hey, um, son, daughter, just so you know, a million dollars waiting for you when you're 21, right? Like that might paint the wrong picture. What I want to teach them is, Hey, here's how compound interest works. Here is what $1 can turn into. $88 means. Here's what the wealth multiplier looks like. I would begin having those conversations, and when you see that little seed in their mind start to really grab hold and

Take shape then you can start talking about real things. Like hey, I want to talk to you about your college. You know, your mom and I, we decided we're going to start saving at 529. And this is what we've been doing so that we can pay for that. And we decided want to start an upman. This is the behavior that we've been doing before you ever talk about numbers because Brian, I'm going to give you credit for something you taught me. You have this concept called go-kart math. Oh yeah. And a lot of times people do. First of all, why don't you tell us what go-kart I Haven. I haven't talked about go-kart math in years, which is sad CU. I used to talk about it in content all when I was a kid. I knew my parents made like $40,000 a year. And I knew the go-kart I wanted cost $500. And I remember when I didn't get the go-kart for Christmas, I remember thinking man, my parents just don't love

me because they make enough that they could buy me 80 Go-karts, and I realized as I've gotten older is as a kid you do what's called go-kart math. Is that you're taking very simple assumptions and then expanding on it, whereas that's not the way when you get to adult life. There's a lot of things pulling at your back pocket on that, but forever it's been coined go-kart math. So what I would do like when you do when you tell a kid, Hey, you're going to have a quarter of a million at 21, go-kart math is really, really easy when you start talking about compound interest. And you just talk about $1 earning 10 cents, and that 10 cents earning 10%, and so on and so forth. Then the concept sets in. So if you have not had any conversations yet, Calvin, I would start having those conversations. And as a parent, you'll probably recognize when your child is mature enough to understand the numbers. And that's exactly what you have modeled.

with your oldest daughter. Yeah, and that's why even the estate documents reflect that. I mean, you don't want your if something tragically happens to you while your children are in their 20s. They might not be at the point where they process it the same way as if they came into this seven-figure and beyond sum is in if late 30s or even 40s. So that's why you have to have these conversations um to make sure you're creating financial mutants who understand how to use money as a tool because unfortunately when you're young, it can get it can get all twisted and weird things can happen, and you don't want to squander that opportunity.

When Should We Tell Our Kid About Their $250,000 UTMA Account?

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Teaching Kids About UTMA and Financial Responsibility

Parents are advised to prioritize their own financial stability before building a large UTMA for their kids.

The age of majority in the state determines when the child gains control of the account, posing a potential risk with a substantial sum.

Encouraging kids to work, save, invest, and give, as well as prioritizing life experiences, is crucial in teaching financial responsibility.

The Impact of Setting Up a Custodial Roth IRA for Your Child

Setting up a custodial Roth IRA for your child may inadvertently display other accounts tied to their social security number.

It is important to teach children about the scarcity and responsible use of money to ensure they are good with finances in the long run.

The mindset and training on how to use money as a tool, rather than the center of the universe, are often overlooked when people come into large sums of money.

Parents should gradually introduce financial concepts to their children, starting with the basics of saving and budgeting.

As kids mature, they can be taught about more complex topics like compound interest and investments.

It's important to slowly build up to discussing real financial matters, such as college savings, and to focus on the behavior and principles behind money before diving into specific numbers.

As a child, "go-kart math" involves simple assumptions and expansion, but adult life is more complex.

"Go-kart math" often revolves around compound interest and financial concepts, best introduced to children when they are mature enough to understand.

Importance of Financial Education for Young Adults

Estate documents should reflect the different financial maturity of children in their 20s compared to their 30s or 40s.

Having conversations about money with young adults is crucial for creating financial literacy and responsible money management.

It is important to teach young adults how to use money as a tool to avoid squandering financial opportunities.