If your kids are lucky enough to receive monetary gifts from relatives for Christmas, what do you do with them? Do you let the kids choose how to spend the money? Or put it straight into college savings? Well, there's a specific way parents should handle their children's monetary gifts, according to financial guru Suze Orman.
Orman offers three rules for divvying up the holiday cash your kids receive. Of course, you can adjust percentages to your own needs, but her framework is spot on.
1. Give Your Child Total Control of 50%
Orman says you should let your child choose what they want to do with half the money - no judgment or opinions allowed.
"Let your child learn through personal experience," she says. "What they learn today will impact financial choices they make in the future."
2. Save 40%
Though you can save for whatever you like, Orman says it's important to have specific goals in mind - rather than just a general savings account.
"I personally think every child should be saving as much money as possible for college, even if it is 10 years away," she says. "This is a natural way to start talking in an age appropriate way about the cost of an education." To calculate your estimated college savings plan, use our online calculator.
3. Donate 10%
Orman recommends letting your child choose a charity and donate a portion of their money to it.
"This is a fantastic opportunity to talk as a family about the importance of helping others, whether they are in our neighborhood or halfway around the globe," she explains.
Citizens National Bank offers a Youth Savings Account which can be opened for just $25 and has no minimum balance requirement for those up to age 23. We also offer a Student Checking Account for those age 14-17 which includes online and mobile banking and a debit card. Stop by a CNB office to get your kids started on the path to financial literacy!