How Younger Gen Zers Can Invest Their Allowance

The days of getting a quarter for a chore are long gone. Now if you want to give your kid an allowance, there’s an app for that.

With the click of a button on RoosterMoney, BusyKids, Greenlight and others, you can assign chores and help your children track their financial goals. Once those dollars add up, parents are teaching their kids how to invest their piggy banks on Wall Street.

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“We believe the best lessons are learned by doing,” said James Kassam of RoosterMoney. “We encourage families to learn together so that parents can actively educate, motivate and empower their kids financially — giving everybody the reassurance that they’re fully prepared for the future.”

According to RoosterMoney, 56% of parents choose to give a regular allowance.

“From as young as 4 years old, you can award ‘Stars’ in the app as a first introduction to the concept of earning and rewards,” Kassam said. “When they are ready, you can move them onto the Allowance Tracker that lets children keep track of their earnings, save toward goals and develop good money habits, whilst parents oversee what money goes in and out — so you remain the Bank of Mom & Dad without having to make actual deposits.”

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So, what’s the going rate for allowance these days? At 12, they can rake in an average of $13.11 in pocket money a week, according to RoosterMoney. At 13, they get a pay raise to $14.80 a week and by 14, they are pulling in $15.70 a week. Top-earning chores include getting paid as much as $7.49 for mowing the lawn and $4.48 for raking the leaves.

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It’s not just manual labor that’s helping kids earn cash. A visit from the tooth fairy can pull in $5.80, and just being good can add $8.12 to their stash. But by far the biggest payout is birthdays. The average birthday haul is $50.36, according to RoosterMoney.

While giving allowance is an introduction to money discipline for children, it also can be a roadmap for financial independence. Jeremy Schneider, founder of the Personal Finance Club, says parents should start educating children about money once they are old enough to have basic math concepts down.

“We spend most of our childhood in school to essentially learn how to make a living one day. Yet we rarely discuss money, the unit by which we measure the ability to make that living,” Schneider said. “It’s like training to be a football player your whole life, but not learning how scoring the game works. Inspiring solid financial behavior from a young age is the best way to have financial success as an adult.”

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This means that there’s no time like the present to get your children interested in investing. When deciding what amount to invest, it’s important that parents don’t get stuck on setting goals by age ranges. Instead, each goal should be personalized to your financial situation.

This is what Schneider refers to as the “oxygen mask rule.” Parents: Secure your own finances before helping your children. This will allow you to help more.

“Setting a good example and talking to your children about why you’re paying off debt or saving for retirement will have a better impact on them than trying to fund a child’s investment account beyond your financial ability,” Schneider said.

Some options that Schneider suggests are getting a brokerage account in your name, a custodial brokerage account, a 529 or a custodial Roth IRA (if your child has earned income).

“I think it’s great to open a custodial brokerage account for your child,” Schneider said. “Putting even a few bucks in there and picking an investment will show how money can grow if invested, rather than just being something to spend.”

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Maya Corbic, a CPA who left the corporate world in 2012 and started the Dinarii Financial Education Academy, agrees. Corbic, who is a mother of two young Gen Z kids, ages 12 and 14, says she started teaching her children about money at a very early age — including investing.

If you are a parent who is trying to spark an interest in investing with your children, Corbic advises you start with ETFs and companies that are familiar to them.  Some top companies that are in her children’s portfolio are Roblox, Disney, Apple and Netflix. Tesla, Amazon, Kellogg’s and Nike are also suggestions that Corbic mentioned.

“I like that in the U.S., the kids can buy fractional shares of companies through Stockpile or Robinhood, so they can own a portion of Amazon stock that costs $3,500 and eventually they can buy the entire stock,” she said.

Don’t stop there. Set aside some time as a family to discuss the performance of their portfolios. “We periodically review how our investments are doing and have good discussions about the markets and where they are going,” Corbic said.

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As with anything, there are some cons. “A con is that many parents do not know how to invest so they do not feel comfortable teaching their kids about it or opening accounts.”

Corbic has a higher mission for spreading knowledge about financial literacy and investing.

“As a CPA, I have worked with various clients who made lots of money but had nothing to show for it,” Corbic said.  “I realized that even though some of them were very smart, they were never educated about money management. I also realized that if we could teach our kids to be successful money managers, we could change our society for the better.”

Resources for parents:

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Last updated: Sept. 15, 2021 

About the Author

Emeri B. Montgomery joined GOBankingRates in 2021 as Newsletter Editor after nearly 12 years as a senior editor at MSN.com. Before that, she had an extensive career in newspapers, including working at The Chicago Tribune, The Baltimore Sun, Newsday and the Monroe News-Star. She is the author of the children's book, 'The Tiny Human Hotel,' and has been published in 'Chicken Soup for the Soul: Count Your Blessings'.

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