Kids and Money: What You Need to Know

[00:00:00] Tanya Van Court They are recognizing that these kids come out of high school knowing the periodic table. Right? I'm sure if I said, hey, Jennifer, what's NA what CL? You'd be like, yep, Tanya got those sodium chloride, right? But if I asked most people who are, you know, walking around Manhattan somewhere, can you explain to me the difference between a stock and a bond? A lot of people could not explain that.  

[00:00:27] Jennifer Borget Having kids changes everything. Your lifestyle, your budget and your financial goals. As parents, what changes should we prepare for and how can we set our kids up to be financially successful? From kindergarten to high school? There are many ways to help kids develop financial savvy and help them get ready for the future. Today, I'm joined by Tanya Van Court, the founder of Goalsetter, an Education First app and debit card that educates kids on financial topics to unlock their spending money. Tanya is passionate about empowering the next generation to enter adulthood with the tools they need to thrive financially. I'll also be joined by Morgan Krause, senior director of field growth and engagement with Northwestern Mutual. She's going to walk us through what parents should be thinking about financially and how to save for important milestones for their kids. Welcome, Tanya. Okay. So before we jump fully into this interview, can we start by having you introduce yourself to our audience?  

[00:01:27] Tanya Van Court Absolutely. I'm happy to. Hi, everyone. Tanya Van Court. I'm the CEO and founder of Goalsetter.  

[00:01:33] Jennifer Borget So tell me a little bit about this inspiration behind Goalsetters. Like what is it for our listeners who are wondering? Tell us a little bit about it.  

[00:01:42] Tanya Van Court Goalsetter is a family finance and financial education platform. And so we offer a savings account, we offer a debit card. And I think most importantly, we offer financial education for kids of all ages and not just the kids, but their parents, too. And so every single week, whether you are in kindergarten or you're in 12th grade or you are in college or again, if you're a parent who just never learned financial education and you want to start to understand key financial concepts, we offer a weekly financial education quiz at every age and stage so that, you know, when you're six years old, you're learning about concepts of needs versus once maybe when you're in 11th grade, you're learning about APY versus APR. And when you're an adult, you're learning about mortgage interest rates and points on a loan. And so we are teaching each of these financial education concepts, but doing it also tied to this amazing savings account, debit card, goal oriented savings tools. And so we're helping people to learn the concepts and then put those concepts into action.  

[00:02:50] Jennifer Borget And being able to apply it. That is so important, I think. How would you describe the state of youth financial knowledge in our country?  

[00:02:58] Tanya Van Court Well, Jennifer, unfortunately, you know, to your point, this is what you want for your kids. You want financial education for your kids. And when we go out and ask parents, what do you want in a kid's banking app? The number one thing that parents say is they want financial education. The number two thing they say is they want a savings account. And the third thing they say is that they want a debit card. But unfortunately, America often gets messages confused based on what is advantageous to the company. Right? And so when you look at kids financial tools today, what are they? They're debit cards. And so, you know, there have been plenty of fintech companies that have started up funded by lots of Silicon Valley venture capitalists who are putting debit cards into kids hands. And, you know, I had a parent come to me one day and said, you know what? My kid has this debit card and it's like pouring money down the drain. My kid ask me for money. I send the money. He asks me for money, I send him money. And this is exactly the opposite of what I wanted when I got my kid this account. American financial education. We have right now 26 states in the nation are starting to require financial education in schools because they are recognizing that these kids come out of high school knowing the periodic table. Right? I'm sure If I sad hey, Jennifer what's NA? What's CL? you'd be like, Yep Tanya got those sodium chloride right? But if I asked most people who are, you know, walking around Manhattan somewhere, can you explain to me the difference between a stock and a bond? A lot of people could not explain that. And that's a travesty in this day and age. So at Goalsetter, we went to some of the most illustrious colleges in the country, all top ten schools, Stanford, Harvard and the University of Pennsylvania. We took a quiz that was a high school level quiz and we gave it to more than a thousand students at these universities. And guess what? On average, these students only got 51 percent right. That's one out of two. So the state of financial education, it's really struggling. The good news is that states are starting to require financial education, but in many instances, they're not funding it. And so that's another problem. The quality of resources that our kids are getting, even if that financial education is being required.  

[00:05:28] Jennifer Borget I cannot believe that 51 percent, that's what they got on this on this quiz. What does that say about the current state of financial literacy among young people? And what does that tell us about the gaps in our education?  

[00:05:41] Tanya Van Court It says that we are educating young people today or not educating young people today around core financial concepts, because we're actually in many ways treating them as if it were 30 years ago. Well, 30 years ago, Jennifer, a significant percentage of people in this country had this prized possession called a pension plan. And as we all know, pension plans have largely gone away. So 30 years ago, if you didn't receive financial education in high school and most people did not when you came out of high school, if you got, you know, a great blue collar job or if you went to college and you got a job at a great corporation or a job for working for the government, most of those jobs offered you a pension plan. And so even if you didn't understand financial education and you woke up at age 30 and said, wow, I think I better start thinking about retirement, someone else had already been thinking about retirement for you for the past ten years and your money had been growing. Invest it through your pension plan. Right? Well, guess what? That no longer happens, right? How many people do you know who are coming out of college and going to work for a firm that offers them a pension plan? It doesn't happen anymore. And so if these kids don't know what to do with their very first paycheck from the moment they get out of high school, from the moment they get out of college, if they don't know that they need to start saving for an emergency fund of three to six months of their expenses, they're in trouble if they don't know what it means to selected their 401(k) elections or even what a 401(K) is. They're in trouble if they don't know what a Roth IRA is, they're in trouble. And so, you know, these concepts of financial education, these are the safety net for our kids because you know that the traditional safety nets that America provided 30 years ago just don't exist anymore. And so we actually tie the financial education to the kid's debit card. So on Sunday morning, if your kid has not taken their weekly financial education quiz, their card will automatically freeze. And then the moment they take the coin in the card increases again, where they might not do that financial education on their own. But they're definitely going to do it to make sure their card is working.  

[00:08:07] Jennifer Borget So what are some good introductory topics, like an example of a money concept maybe that parents could discuss with their kids?  

[00:08:15] Tanya Van Court Well, listen, I think the one that every single parent should master and every parent, you know, recognizes is valuable not just to their kids, but to them, too, is needs versus the wants. Needs versus wants is one of those very early concepts that kids can understand when they are five years old. You know, we are in the store. You are asking for, you know, ice cream. Do you need this ice cream or do you want this ice cream? The reason a whole lot of adults are in financial trouble is because they spend money on things they want rather than the things they need. So, you know, you will find there are many, many tools and even some banks that do this, meaning, you know, piggy banks that do this. But the concept of allocating your money to different buckets, right? Again, these are kid concepts that apply to grown ups, too. And so if you can get kids into these good, healthy financial habits, then they don't struggle with them so much as adults because they're not new to them as adults. So, you know, saving, sharing, spending, and then, you know, investing should be a fourth bucket. We have to think about our future self as just as important as our current self. And our future self is going to want things in terms of your kids, right? Our future self is going to want maybe a bike or a future self is going to want to skateboard. Our future self is going to want a video game and that future self, when they want those things won't be able to buy those things if you didn't save enough money for your future self. And so, you know, again, applies to being adults too, right? Because with adults, when we don't save appropriately, when we don't save for emergency funds, when we don't save for retirement, we are literally robbing our future self of a good life. That's what we're doing. And that person has to be thought of as just as important as today's person. And then as your kid gets older, you know, this concept of investing becomes critically important. There are people today who are still keeping I literally met with someone the other day who said, Tanya, I there is a woman I was talking to both that are provides financial education to school systems as well. So I was talking to a school administrator who said, I have a staff member who keeps 20,000 dollars just sitting in a bank account and the amount of compound interest, the amount of potential wealth that that person is losing out on because they don't understand the market, they don't understand investing, they don't trust it. You know, it really is criminal in many ways that that we have not taught people the basics of how to build wealth because it means that there are people who participate and people who don't participate. So having your kids understand the difference between those two is really important.  

[00:11:15] Jennifer Borget So, you know, this topic, obviously you and I are very excited about this. We want our kids to, you know, have this knowledge and growing up, but sometimes it's something for some of our listeners. They might not be used to talking openly about money or maybe they didn't talk about it growing up. So how can parents break the ice and start these kinds of conversations?  

[00:11:36] Tanya Van Court You know, you are 100 percent right that a lot of parents find it difficult to have these conversations. And I think that there are two reasons for that. One is, to your good point, there are cultural reasons, right? Like how did I grow up in my family and what am I accustomed to and what did my parents do? So those are cultural barriers that you've got to break through. I'm sure there are many other things that, you know, you may have grown up with in your family that you say, I'm going to do that different than my parents did. Right? And I think that money is certainly one of them. I think the second reason that people don't talk to their kids about money is because we didn't receive financial education when we were kids. And so often we are adults who don't know about these core money concepts. And it shows, you know, a real weakness in terms of our knowledge base that that we're afraid to expose to our kids. And so I think that from a parental perspective, this is one of those places and spaces where parents have to be comfortable being vulnerable and saying, look, I want something better for you than I had. And I didn't have financial education and I probably would be twice as well-off if I did and if I knew these concepts early on.  

[00:12:52] Jennifer Borget I think this is such an important topic. So how can you set kids up to to earn their own money? Like let's say you are, you know, talking to your kids about this. And it's one thing when you're talking about saving and spending, but what about when it comes to earning?  

[00:13:09] Tanya Van Court Well, you know that the thing that I recommend to most parents when they are thinking about. You know, how do you and set your kid to to earn their own money is what I called opposite parenting. And so what do I mean by that? What I mean is that, you know, when you talk to most parents about what they want to do for their kids, every single parent says, I want my kids to have a better life than I did. Right? Better in whatever way I want my kids to have a better life than I did. But the truth of the matter is, oftentimes what we're doing is we're setting our kids up to have a worse life than we did because we're giving them everything. And so they are developing an expectation that money comes easily, that, you know, if you go and spend what you have, more will come somehow. The real lesson for me happened when my son, who's 14 now, my son was in third grade and he forgot his lunch at school. And, you know, I had meetings that day, lots of stuff. But I was like, my gosh, he forgot his lunch. Drop everything. I have to rush and I have to take him this lunch at school. Right? And then a couple of weeks later, it happened again. He forgot his lunch again. What did I do? My gosh. I have to be supermom. Like, I cannot. I cannot possibly let my kid eat the school lunch. And then a couple of weeks later, it happened again. And I thought to myself, This is absolutely insane. And getting your kid to earn income, it's the same thing. What do we have to do? We have to start saying no. And it's the opposite of what you want to do.  

[00:14:51] Jennifer Borget So similarly, in a world where, like credit cards and online shopping, you know, it's easy to access. Do you go into that also, like we've talked a lot about like saving and investing, but do you also talk about how parents can make sure their kids are developing healthy attitudes toward borrowing and spending?  

[00:15:12] Tanya Van Court Spending is easy. And so I think it's really very important to talk to your kids about debt and make sure that they are very clear on staying away from that buy now, pay later button. That's number one, right? Number two, credit cards are for credit scores. The importance of a credit card is for you to build your credit history. Credit cards are not for cute outfits. Credit cards are not for, you know, crazy vacations. Credit cards are for credit scores. If you get a credit card and you spend  2,000 dollars because you want to go on spring break vacation with everyone else, your first year in college, and then you make the minimum payment on that credit card. You know, you say to yourself, this wasn't so bad. See, I only have to pay  15 dollars a month or  20 dollars a month. You could be paying that credit card off for 30 years. This is what the math looks like. Right? And your  2,000 dollars just turned into a  6,000 dollars expense. So I do think it's really important to talk to them about the proper use of credit cards, about how credit cards are essential to building credit scores, but you know also about the dangers as well.  

[00:16:30] Jennifer Borget As a parent myself, I found Tanya's advice to be so helpful. Simple lessons like understanding needs versus wants can help kids establish healthy money habits that stick with them throughout their lives. Now to help me break down how parents can budget and save, I spoke with Morgan Krause. Morgan is a senior director of field growth and engagement at Northwestern Mutual. He talks about the importance of financially planning as a parent. There's a lot to discuss, so let's dive in. Hi Morgan, so to start, can you introduce yourself? Tell me a little bit about your area of expertise.  

[00:17:02] Morgan Krause Yeah, absolutely. I'm Morgan Krause. I'm a senior director on the field performance team, and I lead a newly created team that partners with our field leaders to ensure that advisors are optimizing their affiliation with Northwestern Mutual.  

[00:17:18] Jennifer Borget All right, so then diving in. So we just had a really great conversation with Tanya about how parents can teach kids about money. But when you're a parent, there's a lot you need to be thinking about when it comes to your kids and money, not just how to talk to them, but also like how to financially plan for kids if you're about to start having kids. So let's start there when you have kids. What are some of the changes to your money that you might want to be thinking through?  

[00:17:42] Morgan Krause Absolutely. So as a mom of four young children, I know this all too intimately well, you know, before kids were focusing on immediate goals like saving for a house and paying off student loans or maybe even building up that emergency fund. And then children suddenly enter the picture with no training manual and certainly nothing to help you on the financial side. And we're juggling daycare costs and extracurricular activities. And then, of course, the looming cost of college.  

[00:18:13] Jennifer Borget Very scary, looming cost. I've got one that's in high school right now that I might ur. So how do you prep for that?  

[00:18:20] Morgan Krause Yes, what a great topic. So something I'm super passionate about and that I started early on actually before my first child was even born. So first and foremost, I would say reach out to your financial advisor and have this conversation. If you don't have a financial advisor, meet with one of our financial advisors to really develop a plan because you'll learn so much in that conversation. A 529 plan is a great and probably one of the most powerful tools for parents in terms of prepping and saving for college. It's a state sponsored plan that allows you to save for future education expenses with tax advantages so the money grows tax free with and withdrawals for qualified expenses like tuition, books and even some room and board costs are all tax free. The other benefit is more recent. In recent years, they've added the opportunity where you can actually convert unused 529 dollars into a Roth, which is a great benefit. Some stipulations there and it's transferable. So I know that a lot of parents are thinking, well, how do I know if my six month old is going to go to college in 20 years? It's great because the funds can be transferred from child to child. The other thing, like I said, what we learned early on with working through our financial advisor is you can actually start 529 even prior to the child being born. So unlike our life insurance policies in which you have to wait, you know, until that child is actually here to be insured, then you can start the 529. So my husband and I created a 529 put myself as the beneficiary. And then one our, once our first child was born, switched it into her name.  

[00:20:03] Jennifer Borget So what else should parents be thinking about?  

[00:20:06] Morgan Krause Yeah, one thing we haven't really spent a lot of time talking about is retirement. And I know you're thinking, okay, we have diapers and formula and mortgage or rent, you know, all of these expenses. How does retirement fit into place? I think it's crucial that you spend time with that budget and ensure that you are saving for retirement because of the power of compound interest. Every dollar that you save today when you're younger is going to be worth a lot more in retirement than that same dollar that you may save labor later. And what do I mean by that? So according to Northwestern Mutual's Planning and Progress study in 2024, Americans think they're going to need, on average, about 1.5, 1.46 million for retirement. So if you save monthly for retirement and we assume that you can get a 7 percent return that compounds daily, here's how much you'd need to save every month to have 1.46 million at age 65. You're ready for this?  

[00:21:05] Jennifer Borget Yes.  

[00:21:07] Morgan Krause If you start in the month that you turned 20, you have to save  382 dollars every month until you're 65 and you'll have 1.46 million. If you wait until you're 30 to start saving, you have to save  805 dollars a month. Start at 40. It's nearly  1,800 dollars each month. While it's never too late to start saving, it can be costly to wait. So I just mention this because it's much easier to build that savings into your retirement early on before adding the kids. I always think about paying yourself first and getting in the habit of paying yourself first.  

[00:21:47] Jennifer Borget Wow. Yeah, that's definitely a big change from starting when you're 20, you think, can I really afford another  382 dollars a month out of my budget. But if you don't, you're going to have to save a lot more than that later. Wow. That's a big difference.  

[00:22:03] Morgan Krause Yeah, I just want to make sure that young parents aren't putting this off entirely because it can really feel, you know, 1,800 dollars at 40 versus starting at 20 with 300 is a large difference.  

[00:22:16] Jennifer Borget All right. So you mentioned planning in case something happens to one or both of you, but how can you plan for that?  

[00:22:22] Morgan Krause This is a big one and one where we find that people have a lot of blind spots. So let's saying paying college is a big goal and something that, you know, you've sat down with your financial advisor and it's something that's important to you or saving for that lake house is important to you. Well, what happens all of a sudden if you become disabled, you're sick or you get hurt in a car accident and you can no longer work if you're no longer working and bringing in money, that means that you're no longer able to save for those, you know, goals that you have set in the future. So it's really important to plan for a disability. This topic isn't one that's a ton of fun to talk about, but it's so important for parents. And there's typically a peace of mind once you've got it taken care of. Planning for disability is one of the things that you should be thinking about. In addition would be life insurance. For many parents, term insurance is the most cost effective option. It provides coverage for a set period of time, something like 20 to 30 years, which often aligns with the years in which your kids are fully dependent upon you. But if you're looking for a policy that offers lifelong coverage and builds cash value, permanent life insurance might be something worth exploring. The goal here in preparing for a disability or even a death is to ensure that your family can maintain their lifestyle. Covering housing, education and other expenses that you wanted to plan for.  

[00:23:53] Jennifer Borget I love chatting with both Tanya and Morgan, and there's so much to think about as a parent. Knowing what to cover and how to save is a critical part of setting your kids up for the future. Our two experts gave us great advice on how to do this, so here are some of my key takeaways. First, education is essential. Tanya emphasizes again and again how critical educating kids about money truly is. A few key things to remember are the three S's saving, sharing and spending. Tanya also emphasizes a fourth critical financial concept Kids need to learn investing by the time they're teenagers. Kids should understand the difference between saving and investing and why investing is key to building long term financial success. Next, it's okay to say no. While it goes against our instincts as parents, saying no to giving children money helps them in the long run by always saying yes to giving kids money, they can come to expect it, which can create adults who have bad spending habits. And finally, planning can help you balance your priorities. There's a lot to balance as a new parent, maybe even a few things you hadn't thought of. But planning can help you prioritize your money and make sure you have what you need now and in the future. For a downloadable worksheet to help you plan for kids and other financial planning resources, visit Northwesternmutual.com/podcast.  

[00:25:28] Disclosure Financial representatives do not render tax advice. Consult with a tax professional for tax advice that is specific to your situation. All investments carry some level of risk, including loss of principal invested. No investment strategy can assure a profit and does not protect against loss in declining markets. Northwestern Mutual is the marketing name for the Northwestern Mutual Life Insurance Company NM and its subsidiaries in Milwaukee, Wisconsin. Not all Northwestern mutual representatives are advisers. Only those representatives with advisor in their title or who otherwise disclose their status as an adviser of Northwestern Mutual Wealth Management Company NMWMC are credentialed as NMWMC representative to provide advisory services. Tanya Vann Court of Goalsetter is not affiliated with Northwestern Mutual and the views expressed by Tanya do not necessarily represent those of Northwestern Mutual or of its subsidiaries.