It’s summertime, and my boys are just like most kids – all they want to do is play sports or splash in the pool. However, I know they are happy to sit down with me and pay close attention for 10 minutes a month, even in the heat of the summer. It’s when we go over their investment portfolios and track their net worth.
I carve out 10 minutes on the first of every month to review my boys’ personal finances. If you are looking to create a similar process with your kids, here is a step-by-step guide of how we do it in our family. I know that these 10 minutes a month make a lifetime of difference for Nathan’s and Milan’s financial futures. You can do the same for your kiddos.
Benefits of tracking net worth
Tracking your net worth is a foundation of financial health. It is the most critical number to know when it comes to personal finances. The earlier your kids get comfortable with this concept, the better.
Also, it’s essential to teach your children about financial loss and risk. So far, my kids have been through the stock market downturn of 2020, so they understand that you can lose money in the stock market from time to time. It doesn’t always go up in the short term. It feels like there is a whole generation of investors who mistakenly think that anything you buy goes up in value and have never heard of the word inflation.
Additionally, my sons have learned that their actions have financial consequences and can reduce their net worth. For example, when Milan lost his iPod and wanted a new one, he had to pay for it with his own money. That major purchase reduced his net worth, and his brother got ahead of him (it’s not a competition, but it is).
Now, let’s look on the bright side. If your children see their net worth grow month after month, they become more interested and engaged in learning about investing and personal finance. It’s an additional opportunity for you to talk about money and answer their questions.
Earning, spending, saving, investing, and donating are all the things financially literate adults do with their money. Don’t you want your kids getting better at those things when they are young, and stakes are low?
But the most essential piece of the puzzle for me is demonstrating to my kids the power of passive income and the concept of money making money. I love watching them being blown away by the fact that they did not have to do a thing, but the money just kept on growing.
If they fully understand the power of passive income and compounding returns, I know they will never depend on the paycheck or be forced to do the job they hate. It’s called financial freedom.
Well, I hope I’ve convinced you that spending a bit of time every month to go over your kids’ financial details is a great thing to do. So, here is how I do it.
Step 1 – Create an Excel spreadsheet
Create a simple spreadsheet in Excel to keep it all together. No need to complicate it. The idea is to track it every month, so your kids can see the progress. Mine looks like that:
Step 2. Earning, saving, and donating with the Busykid App
A BusyKid app is an excellent tool for teaching young children the basics of money management. I’ve been using this app with my kids for over a year, and we all love it.
You can find a detailed post about all the features of the BusyKid app right here.
I used to pay my kids for the chores they completed. However, several months ago, we switched to a weekly allowance model. I still expect them to finish all the chores they are supposed to do, but we don’t keep daily track of it anymore. The app gives you the option to do both options.
I log into the BusyKid app and go to my parent dashboard (I crossed all the numbers for privacy reasons):
From there, I get four numbers:
- Money available for spending
- Balance on the debit card
- Money available in the savings bucket
- Money available in share bucket
I plug these numbers into my spreadsheet.
Step 3. Figuring out the investing component
Stockpile App is a great tool to teach young children about the basics of investing. Your kiddo can start investing in 4000 + stocks and ETFs with as little as $5.
The best part is that the app is connected to the BusyKid app, so the money your child decides to invest part of the “save” bucket in the BusyKid app goes into the stock purchases on the Stockpile app. I hope this makes sense.
You can find a detailed post about all the features of the Stockpile app right here.
When I log into my dashboard on the Stockpile app, this is what I see:
From here, I get the value of my son’s investment portfolio (I can easily switch between the kids at the top). There is a nice graph showing you the performance of your child’s portfolio over the past month (you can also pick a different interval, like a day, a week, or max timeframe).
If your child does all of his investing in one place, you’re done after this. Just grab the number that shows the value of his portfolio and plug it into the spreadsheet.
I’ve made my life a bit harder and created an additional investment account for each of my kids with Fidelity. They use the Stockpile app to invest in individual stocks and Fidelity – to buy index funds. However, all of it can be done within the Stockpile app.
Putting it all together
Once I have all the numbers in the spreadsheet, I sit down with each of my kids separately and go over their finances.
We look at the total number and how much their assets have grown month-over-month.
Then we dive into the investment portfolio part. First, I show my kids how much their ETF portfolio has changed, and then we log into the Stockpile app. There, we look at the overall portfolio’s growth, and then we dive into each individual stock. We look at the chart of the stock price for the past month, total return in percentage points, read relevant news headlines, and then I ask my child to decide if he wants to add some more money to his position and how much.
That’s it. In the end, my kids know how much money they have in assets and how much more they want to add to which positions.
The bigger picture
I hope this wasn’t too confusing. Download the Stockpile App and the BusyKid App. They are both very user-friendly and easy to navigate. You’ll figure it out in no time. Keep track of all the numbers in Excel or any other way that works for you. The key is for your child to see the growth and progress they are making. All it takes is 10 minutes a month – a chance to build a solid financial literacy foundation for your