Putting kids on

the road to financial

independence
Tips and tactics for every age
 60%
of teens consider
learning about money
management one of their
top priorities, according
to a Schwab survey.

The average outstanding

balance on undergraduates’ Statistics show there’s a need to help kids
credit cards is learn about money. But you don’t have to be a

$3,173.
financial whiz to get started. The lessons of your
own life—your values and what shaped your
personal approach to finances—can be a great
foundation for helping a young person make good
financial decisions.

Today’s financial world may be a bit more

While the median household
challenging than when you were growing up. But
income in the U.S. is
with a little planning, you and the young person in
$48,000, today’s teens
your life can explore ideas, share goals and
believe they’ll be earning

$145,500.
celebrate the achievement of milestones on the
road to financial independence.

$23K is the average student

loan debt for today’s
college grads.

See back page for data sources.

Rules of the Road
For many families, talking about money can be uncomfortable at best. Need a hand
getting started? Here are some guidelines to make teaching money skills easy for you
and rewarding for everyone in your family:

• Make money conversations a part of everyday life. Jump-Start the Savings Habit . . . . . . . . . . 2
On a trip to the store or while planning a family
Giving—It’s a Family Affair . . . . . . . . . . . . 3
vacation, talk about how you budget and save.
Smart Spending—Now and Later . . . . . . . 4
• Set a good example. Friends and the media have
a lot of influence on kids, but when it comes right Be a Hands-On Credit
down to it, what your children see you do is and Investing Coach . . . . . . . . . . . . . . . . . . 6
probably the most important influence of all.
Real-Life Experiences
• Use age-appropriate activities. Consider your to Share and Celebrate . . . . . . . . . . . . . . . 8
child’s personality. No two kids are exactly
alike—nor are their approaches to money.
• Talk to girls and boys in the same way. They need
to learn the same lessons about spending,
saving, borrowing and investing.
• Try to be open about family finances. Find areas
where you’d be comfortable involving kids in
family financial decisions.

Now read on for ideas and activities to make learning about money
fun and engaging for the kids in your life—and for you, too!

1
Jump-Start the Savings Habit
Even the youngest kids can understand the idea of setting goals and saving to reach
them. And they’ll enjoy seeing their money add up. Plus, the earlier kids start developing
good habits, the more likely they are to achieve financial independence later on.

Going for a goal

What do your kids want from their money—a video
game, a car, a special trip? What about college?
Saving for a goal is a good way to instill the savings
habit. Have your kids:
•  Write down both a short- and a long-term goal,
and attach a price to each.
•  Set aside at least 10% of their allowance, gifts
and other income toward their goals, and figure
out how long it will take to reach them.

Putting time on their side

When it comes to saving, time is every kid’s
greatest asset. The sooner they start, the longer
they have to save and the more money they’ll end
up with. To make this real, talk about how they
can earn interest on their savings. Particularly for younger kids, the idea of earning even a few pennies
in interest can be very motivating.

Once they’ve accumulated some savings, help them open a savings account and watch their money—and
interest—add up!

How long will it take to reach a savings goal? Use the Savings Calculator
on SchwabMoneyWise.com under Calculators & Tools to find out.

2
Savings Activities

YOUNG KIDS: Decorate separate jars for each savings goal. Create
a bulletin board to track progress. Get everyone involved and turn it into
a family competition.

MIDDLE SCHOOLERS: Help your child open a savings account. Shop

for an account with no fees. (Your own bank may be willing to negotiate.)
Don’t forget to bring your child’s Social Security number. Ask the
manager for a tour and a demonstration of online banking.

TEENS: For teens who work, help them set up Direct Deposit to put
part of every paycheck into a savings account.

ALL KIDS: As an incentive, consider matching your children’s savings

(say, 25 cents or 50 cents on the dollar). Or offer bonuses if they reach
their goals. It shows you’re behind their efforts.

Giving—It’s a Family Affair

Learning to save and learning to give go hand in hand. You can make
philanthropy a family focus by doing these things together:
• Volunteer as a family. It will help kids appreciate what they have—and
realize how they can make a difference.
• Let kids research and choose an organization to support.
• Match your kids’ donations dollar for dollar to show your support.
• Make donations as a family to a favorite cause or charity.

3
Smart Spending—Now and Later
A recent Schwab survey showed that nearly all parents (93%) worry that their kids might
make financial missteps, such as taking on too much debt or living beyond their means.
To help your kids avoid these common mistakes, teach them early on how planning can
help them take charge—not only of their money but also of their future.

Making money decisions

Kids need to have money of their own to touch and
experience before they can really learn to value it.
Giving them an allowance is a good first step. As
your kids get older, they’ll have other ways to earn
money, like a part-time job.

Whatever the source, the important thing is to let

kids make their own spending decisions—and their
own mistakes—while the stakes are low.

Spending Activities for Younger Kids

Help a preschooler begin to understand

the value of money by giving her a dollar to
buy a nutritious snack. Let her pay for the
snack herself, get a receipt and keep the
change. Encourage her to put the coins in her
piggy bank.
Turn a grocery-shopping trip into a
bargain-hunting game. Example: Can your
child find a box of cereal for $3?
Comparison shop. Have your kids find
the most expensive and the least expensive
juice. Why does one cost more?
The basics of budgeting
To introduce the concept of budgeting, have kids
track their spending by writing down every purchase
for a week or two. This will show them where their
money is going. Then take it a step further by
having them:
• Add up their income (from allowance,
gifts or a job).
• Write down all their expenses, including savings.
• Do the math.
If they come up short, talk through the budget and
discuss where they can make adjustments and
trade-offs.

4
Health &
Grooming
Doctor, Vision, Dental
Grooming (hair, nails, etc.)
0
0
Ever wonder
Gym/Health Club
Other
0
0
where all your
Education Tuition & Fees 0
money goes?
Textbooks & Supplies 0 Our online Monthly
Other 0
Budget Planner can
Additional Gifts 0 help you and your
Expenses Charitable Donations 0 kids stay on top
Other 0 of expenses.

Go to SchwabMoneyWise.com and click on Calculators & Tools.

Budgeting Activity for Older Kids

Make budgeting fun by letting kids plan a trip or an outing.

Give them a budget—$1,000 for a family vacation or $50 for a

special family night out, for example.

Have them research and estimate expenses for transportation,

lodging, meals and activities.

Help them be creative and make trade-offs to stay within budget.

For example, if dinner and a movie exceed the budget, help the kids find
a free event in the local newspaper.

5
Be a Hands-On Credit and Investing Coach
As the kids in your life get to the age when they’re handling larger amounts of money,
talk to them about the importance of managing debt and investing for the future. Both
discussions offer a great opportunity to reinforce the ideas of goal setting, saving,
budgeting and more.

The nuts and bolts of borrowing Credit Card Activities

Learning how to use a credit card while still living at
home may help teens avoid the pitfalls of credit
card debt that so many college kids fall into. To
help your teen handle credit wisely, be sure to:
• Explain that credit cards are useful as long as
you can pay off what you charge each month.
First open a checking account. Teach
your teen how to use a check register and
review monthly statements. Be sure he or
she knows how to pay bills before using a
credit card.

• Discuss how interest and late fees add up if you Start with a co-signed card. Set a limit
don’t pay off the balance. of $500 or less, and set some ground rules
• Explain that credit cards are best used with for how and when to use the card.
discretion—not for day-to-day purchases
Pay off the monthly balance. Review the
under $10.
monthly statement and have your teen pay
Don’t forget about credit scores. Teens need to the bill from his or her own checking account.
understand early on that a credit score can follow
them through life—and affect their ability to get a
loan, an apartment or even a job.

SchwabMoneyWise.com is filled
with interactive tools to make learning
money skills interesting and fun.

We want to hear your ideas, too. Go to

SchwabMoneyWise.com to share your insights.

6
Investing 101 The value of investing early:
How two sisters compare
The best way to introduce kids to investing is to speak their language.
$250,000 Mary
Keep it simple. Start by explaining that investing is a means of using
your money to try to create more money. Then talk about: $141,179
$200,000
• Long-term investing—A longer time horizon helps you weather any Total earnings
Total monthly
market’s natural ups and downs. $150,000 contributions

• The power of compound growth—Compounding can have a

snowball effect as your original investments and the earnings on $100,000
Sue
those investments grow together over time. The earlier you start $96,000
$25,666
investing, the greater the impact compounding will have. $50,000
$48,000
• Risk and reward—Stocks, bonds and mutual funds are generally
more risky than a savings account, but they can also provide the $0
Invests $400 Invests $400
per month for per month for
potential for a higher return. 20 years 10 years
Mary earns more than five times as
• Diversification—It’s risky to put all your eggs in one basket. You can much as Sue, who starts 10 years later.
minimize risk by spreading investments across stocks, bonds and cash Note: Example assumes a consistent annual
rate of return of 8% compounded monthly.
equivalents, as well as across sectors, industries and companies of Inflation, taxes and expenses are not factored in.
all sizes.
Investing Activities

AGES 10 & UP: Try virtual investing. Demonstrate how to research stocks
online, and then have them “buy” 10 shares of a few companies they like.
Record the “purchase” price, monitor the performance and, after a month,
have them calculate what they gained or lost.

TEENS: Open a custodial account (or a custodial Roth IRA if your teen has
earned income) and let them help select appropriate investments. Have
quarterly check-ins to review how well the investments have performed.

YOUNG ADULTS: As young adults move into the workforce, encourage them
to contribute to their company-sponsored 401(k) at least to a level that earns
the company match, or encourage them to open a Roth IRA as soon as they
start working. This can give them a terrific head start on retirement savings.

7
Real-Life Experiences to Share and Celebrate
As your kids reach developmental milestones, you can help them take big steps toward
financial independence. Sharing and celebrating these real-life experiences provides
you with an opportunity to teach important financial lessons—and gives your kids an
opportunity to take pride in their accomplishments.

Ages 5–8 Starting an allowance

An allowance is the first step toward gaining practical
experience with money. Be sure to:
• Be clear about associated chores and what you
expect your child to pay for.
• Avoid giving extra money just because they ask for
it. Let your kids learn to manage.
• As kids get older, switch from a weekly allowance
to a monthly one so they can learn to budget over a
longer period of time.

5 10

Ages 10–12 First big purchase

Whether your child wants a laptop or a bike,
this is a great opportunity to learn about
making choices. You can help:
• Establish a time frame and savings plan for
making the purchase.
• Track daily spending to identify opportunities
to save.
• Encourage comparison shopping.

8

Ages 15+ Buying a car
For teens, a car is often one of the most
important savings goals. Help your teen:
Ages 20+ Leaving the nest
Learning to be independent is one of the most
important rites of passage. Before your young
adult leaves home, share this checklist:
• If your kids don’t already have them, open key
financial accounts—checking, savings, credit
card, and an IRA or other investment account.
• Make a budget including essentials like rent,
utilities, clothing, food, transportation and
insurance, plus discretionary items like
entertainment.
• Secure health, auto and renter’s insurance.
• Pay debts such as student loans and credit cards
on time. Always pay off the monthly balance on
credit cards—or at least more than the minimum.

• Calculate how much he or she can afford. • Start saving enough to cover three months’
living expenses as an emergency fund.
• Remember recurring costs such as
insurance, gas and maintenance. • Continue or begin to save for other goals.

• Factor these costs into a monthly budget.

15 20

Ages 18+ Going to college

Working out certain details can help make this
important transition easier:
• Be clear about what you expect your student
to pay for and help set up a monthly budget.
• Open savings and checking accounts. If your
student doesn’t already have a credit card,
help shop for the one with the best terms.
• If your student is considering loans, help
evaluate the rates and terms.

9
 A message from Carrie Schwab-Pomerantz

Working together to improve financial literacy

Like reading and writing, financial literacy is a fundamental building block
for the well-being of individuals, communities and society at large. At
Schwab, we’re committed to improving financial literacy by sharing our
time, knowledge and resources. We’ve made a good beginning by:
• Collaborating with Boys & Girls Clubs of America (BGCA) on the Money Matters: Make It
Count SM program to help teens from underserved communities learn the basics of
personal finance
• Awarding scholarships for select BGCA teens who complete the Money Matters program
and demonstrate their financial knowledge and skills
• Creating SchwabMoneyWise.com, an educational website for families featuring calculators,
a budget planner and other resources to help adults and kids alike
• Encouraging our employees to volunteer their time and talents to promote financial literacy
But there’s much more to do. That’s why I’m proud to be working with nonprofit, government
and corporate partners to lead a national effort to improve financial education and literacy.
Through the President’s Advisory Council on Financial Literacy and other important
initiatives, we’re aiming to improve the financial well-being of Americans from all walks of life.
I hope you’ll join us in our commitment by sharing the ideas and activities in this booklet
with a child you care about. Individually and together, we can all play a part in creating
opportunities to improve financial literacy for all Americans.

Carrie Schwab-Pomerantz
President, Charles Schwab Foundation

The information provided herein is for general informational purposes only. The types of savings and investment strategies
mentioned may not be suitable for everyone.
Brokerage Products: Not FDIC-Insured • No Bank Guarantee • May Lose Value

Sources for data appearing on the inside front cover, clockwise from top: Charles Schwab Teens and Money Survey, 2007;
National Project on Student Debt, 2008; Charles Schwab Teens and Money Survey, 2007, and U.S. Census Bureau median
household income data, 2006; Sallie Mae National Study of Usage Rates and Trends, 2009.
Diversification strategies do not assure a profit and do not protect against losses in declining markets.
Printed on 50% post-consumer recycled paper. Schwab is committed to making responsible choices for our environment.
©2009 Charles Schwab & Co., Inc.  All rights reserved.  Member SIPC.  DTS 08859 (0308-5248)  MKT40748-01 (10/09)