10 Money Books for Children and Teens

Reading is one of the most valuable skills children learn. Not only does reading enable us to navigate the modern world, it provides an endless source of learning and entertainment.

I am incredibly thankful that all of my children are avid readers who love nothing more than to have a fresh new book in their hands, but over the years, I’ve learned that you can’t just toss any book at them and expect them to read it. They’re engaged by compelling stories and by things that match up well with their interests in the moment. They’re not immediately going to gravitate to a book about money unless it speaks to them in some way.

Why worry about it at all? The reality is that financial education is a big part of modern parenting. Many schools provide very little in terms of practical financial education, leaving it up to parents to prepare their children for this aspect of adult life, and it can be a real challenge.

There’s an abundance of great financial books for adults, but it’s harder to find great options for children that really hit the sweet spot of being age-relevant and interesting to them. Here are 10 options that manage to balance these two goals.

In this article

The Berenstain Bears’ Trouble with Money by Stan and Jan Berenstain is a wonderful picture book for read aloud time or for early independent readers. It tells a relatable story from the perspective of the two younger Berenstain Bears about the challenge of having limited amounts of money. Children are going to be familiar with the idea of not having enough money to buy the things that they want, but what do they do in that situation? This book handles it with care.

Another good financially minded book choice for preschool children is Curious George Saves His Pennies by H.A. Rey. It focuses on the challenge of having enough patience to save for a large goal without getting distracted, balanced with George’s colorful adventures and distractions.

Brock, Rock, and the Savings Shock by Sheila Bair and Barry Gott takes the idea of compound interest and makes it into an accessible children’s book with a lot of clever rhyming and beautiful illustrations. The book focuses on twin brothers, one of whom chooses to spend on momentary impulses while the other saves his money, leading to the end when the saving brother has a lot of money built up thanks to the compounding.

Another great choice for early elementary children is The Squirrel Manifesto by Ric and Jean Edelman and illustrated by Dave Zaboski. It’s a beautifully illustrated book that brings to mind the fable of the grasshopper and the ant, focusing on a parable involving a squirrel saving resources for the winter to come.

For upper elementary kids: Lunch Money

Lunch Money by Andrew Clements and illustrated by Brian Selznick tells a great story of a rivalry between two entrepreneurially minded children, but within the rollicking tale comes a lot of good ideas about working to earn money, the value of cooperation, investing in yourself, and putting aside money for the long haul. These ideas are really effortlessly weaved into the story.

An alternative choice is How to Turn $100 into $1,000,000 by James McKenna, Jeannine Glista and Matt Fontaine. While this isn’t story-oriented like many of the other selections here, the provocative title and the perfect approach for older elementary-age children who are beginning to have somewhat more expensive tastes make this a great choice for adolescents.

Money Hungry by Sharon Flake tells a very memorable story about a 13-year-old girl who seems obsessed with money, finding all sorts of ways to earn a dollar here and a dollar there. As the story progresses, it becomes clear that she’s driven by a fear of poverty and some painful memories of not having enough when she was younger. This book has spurned some wonderful conversations in our home about money, needs and how different people see those things differently.

Another really great option for middle schoolers is Katie Bell and the Wishing Well by Nephi and Elizabeth Zufelt, which takes something of an opposite approach to Money Hungry. Here, the titular character finds all of her financial wishes easily granted, but finds that it’s not all it’s cracked up to be and that much of what we think of as a wealthy life comes from other things, like relationships.

The Truth About Forever by Sarah Dessen is a beautiful story about a teenager with a summer job who is using that opportunity to both earn money and escape from some difficult life issues, particularly the death of a parent. The book intertwines money issues with the multitude of concerns and difficulties teens often face, resulting in a wonderful story with a great conclusion.

A completely different type of financial book that might just click with your high schooler is I Want More Pizza by Steve Burkholder and editors Rebecca Maizel and David Aretha. This is a nonfiction book, but it’s extremely applicable to and targets almost perfectly the financial concerns of high schoolers. Should they get a job? Should they be saving for college or for a car? It does a great job of addressing the exact questions I often hear from the high schooler in my home.

We welcome your feedback on this article. Contact us at inquiries@thesimpledollar.com with comments or questions.

Source: thesimpledollar.com

UGMA vs. UTMA Account – Which Is Better to Save for My Child’s College?

For many people, a college education is crucial for their career prospects. Yet college is an expensive endeavor. According to the National Center for Education Statistics, for the 2016 – 2017 academic year, undergraduate tuition, fees, room, and board were estimated to run $17,237 at a public institution, $44,551 at a private nonprofit institution, and $25,431 at a private for-profit institution. For that reason, many parents start saving for their child’s college education while that child is still in diapers.

There are several ways to save for education. People often think of 529 plans when it comes to saving for college, but you can also use Uniform Gift to Minors Act (UGMA) and Uniform Transfers to Minors Act (UTMA) accounts. Each account has different benefits and drawbacks. Before choosing how to save for your child’s education, learn more about how these accounts work and what features they offer.

529 Plan, UGMA, & UTMA Defined

Before delving into the pros and cons of these accounts, it pays to understand what each account is.

529 Plan

A 529 savings plan is a tax-advantaged account named after Section 529 of the Internal Revenue Code. These accounts help you save for education. Money in the account accumulates tax-free, and distributions are tax-free as long as you use the money for qualified education expenses.

Qualified expenses include:

  • Required tuition and fees
  • Books, supplies, and equipment
  • Computers, peripheral equipment, software, and Internet access
  • Room and board for students who are enrolled at least half-time

Initially, 529 plan beneficiaries could only use the money for higher education expenses. But in 2017, the government expanded the definition of qualified expenses to include up to $10,000 annually in K-12 tuition.

UGMA & UTMA Accounts

In most states, children under the age of 18 don’t have the right to contract, so they can’t own investments. At one time, that meant parents who wanted to transfer assets to a child for their college education had to hire an attorney to establish a trust.

The UGMA and UTMA made these transfers a lot easier. The UGMA established a simple way for minors to own securities such as stocks, bonds, and mutual funds. The UTMA is similar but also allows minors to own other property types, such as real estate, fine art, patents, and royalties.

Now, parents, grandparents, and other family members can open a UGMA or UTMA custodial account at a bank or brokerage. When they open the account, they have to provide the name and Social Security number of the minor and appoint a custodian who is in charge of managing the money in the account until the child reaches the age of majority (typically 18 or 21, depending on the state).

Differences Between 529 Plans & UGMA or UTMA Accounts

UGMA and UTMA accounts as well as 529 plans provide ways for parents and other adults to help save for a child’s education, but there are several differences.

Use of the Account

You can only use 529 plans for saving for education. You can always withdraw money in the account for other purposes. But if you don’t use the funds for qualified education expenses, you’ll face some tax consequences: You can withdraw the amount you contribute tax-free, but the earnings portion of the distribution is taxable at your ordinary income tax rates. You’ll also owe a 10% penalty.

But you can use funds in a UGMA and UTMA for other purposes.

Tax Advantages

A 529 plan has an advantage over UGMA and UTMA accounts when it comes to tax-advantaged growth.

In a 529 plan, you don’t have to worry about paying taxes on earnings within the account since the funds grow tax-free.

In a UGMA or UTMA account, you may have to pay taxes on earnings, even if you don’t withdraw money from the account. You don’t have to worry about paying taxes if the child’s income is $1,050 or less. Above that amount, the IRS taxes income between $1,050 and $2,100 at the child’s tax bracket and income above $2,100 at the rate for trusts and estates, which could be a lot higher than the child’s tax rate.

For 2019 through 2025, the tax brackets for trusts and estates are:

If taxable income is: The tax is:
$2,600 or below 10% of taxable income
$2,601 to $9,300 $260 + 24% of the amount over $2,600
$9,301 to $12,750 $1,868 + 35% of the amount over $9,300
$12,751 and above $3,075.50 + 37% of the amount over $12,750

Tax Filing Requirements

One challenge parents often run into with UGMA and UTMA accounts is tax return filings. With a 529 plan, the plan’s earnings don’t impact either the parent’s or child’s tax return since the account is allowed to grow tax-free. Once you start taking money from the account, as long as you use it for qualified education expenses, you simply report those nontaxable distributions on your annual return.

UGMA and UTMA accounts can be a little more complicated. For most people, these accounts are hassle-free during the saving years, as they rarely generate enough interest and dividends to necessitate filing a tax return for the child. If the earnings within the account are over $1,050 for the year, the parents may be able to report the child’s income on the parents’ return by attaching Form 8814 to their Form 1040.

The parents can make this election as long as the child meets all the following conditions:

  • The child is under age 19 (or under age 24 and a full-time student) at the end of the year
  • The child had only interest and dividend income
  • The child’s gross income was less than $10,500
  • The child doesn’t file a joint return with a spouse
  • The child didn’t make any estimated tax payments, have federal income tax withheld, or have an overpayment from a prior year applied to the current year

The truly complicated part comes when the child needs funds from the account to pay for college expenses. At this point, they need to sell investments in the account to withdraw funds. That generates capital gains. Parents can’t elect to report capital gains on their own returns, so they typically have to file a separate tax return for the child.

Ownership & Control of the Funds

When it comes to ensuring the child uses the money for educational purposes, 529 plans also have an advantage.

With a 529 plan, the account owner keeps control of the funds no matter the beneficiary’s age. If you save for your child’s education and your child decides not to go to college or doesn’t need all the money, you can switch the account over to another beneficiary or withdraw the money yourself (and pay taxes on the distribution).

With a UGMA or UTMA account, ownership and control over the funds go to the child once they reach the age of majority. At that point, they can spend the money however they’d like. If the child doesn’t need the money to pay for their education, you can’t transfer the account to a different beneficiary.

Contributions & Investment Options

UGMA and UTMA accounts have the advantage when it comes to the flexibility of contributions and investment options. You can fund UGMA and UTMA accounts with cash, investments, real estate, art, patents, royalties, and more. You also have wide latitude when it comes to investing assets in the account.

With a 529 plan, you can only contribute cash, and investment options are limited to those allowed by the particular plan.

You can contribute as much as you want to a 529 plan, but the amount you contribute to the plan each year goes toward your annual gift tax exclusion amount. For 2019, the annual gift tax exclusion amount is $15,000 ($30,000 for a married couple who elect to split their gifts), meaning if you give more than that amount to any one beneficiary’s 529 plan, you must file a gift tax return that year. However, there’s one exception. The IRS allows you to give five years of contributions all at once without paying gift taxes. For 2019, that would be $75,000 for a single person or $150,000 for a married couple.

Impact on Student Aid Eligibility

For financial aid purposes, assets in a UGMA or UTMA account are considered assets of the student. That means they have a significant impact on student aid eligibility calculations — federal financial aid formulas consider 20% of the money in a UGMA or UTMA account as money available to pay for college.

On the other hand, the Free Application for Federal Student Aid (FAFSA) treats funds in a 529 plan as assets of the parent, so it has a lower impact on financial aid eligibility. The FAFSA formula considers a maximum of 5.6% of the money in a 529 plan to be available to pay for college.

If you already have assets in a UGMA or UTMA account and you’re worried about the impact on financial aid awards, you can cash out and reinvest the proceeds into a 529 plan. But before you do, talk to your financial advisor or accountant for help calculating the taxes you’ll pay on any capital gains.

Final Word

If you want to give your child a leg up on saving, which account should you choose? It comes down to your goals. If the primary purpose of your savings is education, a 529 plan offers better tax advantages. If you or your child aren’t sure whether they plan to use the funds for education, buying a home, or any other purpose, you can contribute to a UGMA or UTMA account.

Are you saving for your child’s education? Which type of account are you using?

Source: moneycrashers.com

Tina Hay Q&A: A Discussion About Money and Financial Literacy

Tina Hay, a financial author poses for a photo inside a room,

Tina Hay is the author of “Napkin Finance: Build Your Wealth in 30 Seconds or Less,” a book that offers visual money guides. Photo courtesy of Tina Hay

Many of us weren’t taught personal finance at school, and money wasn’t discussed at the dinner table.

We’ve developed our financial education by browsing articles online, reading books and through a lot of trial and error.

“There’s a big difference between those people who are educated and understand how they can make their money work for them versus the rest who never [had] the basic understanding and then [got] into debt and [paid] for their decisions later,” said Tina Hay, CEO of Napkin Finance.

The Penny Hoarder recently invited Hay to join us for a discussion about her book “Napkin Finance: Build Your Wealth in 30 Seconds or Less” and all things money-related. We hosted a live chat on Facebook where audience members were able to submit questions and hear from Hay directly.

The following is an abridged version of that conversation, edited for length and clarity.

The Penny Hoarder’s Q&A With Tina Hay of “Napkin Finance”

The Penny Hoarder: Can you tell us about Napkin Finance?

Tina Hay: Napkin Finance is a visual guide to money and finance. We help people understand complex topics in a simplified, more digestible way with snackable content — everything from Napkins (our branded infographics) to videos to articles, storyboards, charts and tables. We also add humor and some fun to the content to make it more engaging and interesting.

TPH: What role do visuals play in grasping financial concepts?

Hay: Visual learning is a classic concept. Mozart, DaVinci and Freud all used visual images and graphics to solve their biggest problems. Human beings are visual learners and they process images 60,000 times faster than they process text. Also, 90% of the information that we process to the brain is visual. The visual graphics and assets that we create have been really powerful because it makes the subject matter less intimidating and creates higher comprehension, better retention of the content and also enhanced retrieval.

TPH: Can you walk us through how you go about creating a Napkin?

Hay: We have a team that’s a mix of creatives and financial experts. We start with an article or blog and then we pull out the elements that are the most interesting or important to distill into a Napkin. The Napkin comes to life with our designers and then we create a video or other content based on that. At the end of the day, the ultimate test is: If you’re new to this topic, would you be able to look at this and understand the topic in 30 seconds or less?

Audience Question: How can I convince my young adult kids to start saving for retirement now?

Hay: One thing is to automate so a certain percentage is taken out from their allowance or income every month and transferred automatically into a retirement account. The second thing is to show the power of time and how money compounds. The most powerful asset people have when they’re young is time. It can be extremely powerful to see the impact of how much money can grow if people start saving and investing in their 20s versus their 30s and 40s.

Audience Question: As a single parent going through the pandemic, how can you rebuild credit and rebuild savings successfully and effectively?

Hay: Traditionally, we always say you need three to six months of emergency savings. The pandemic has shown that people really need to have a year’s worth of savings for emergencies, which is considerable and not an easy thing to do. But I think what is important is to always follow a budget to start putting money aside — even if it’s a small amount — and to understand where your money’s coming in and where it’s going out. We have a section on budgeting on our website and in the book. Having a plan in place is the best way to reach your goals.

Pro Tip

Hay suggests a 50/30/20 budget, where you spend half your income on essentials, set aside 30% as fun money and dedicate the remaining 20% to your financial goals.

Audience Question: How do I start a fund for my child? Can my child invest in the stock market? How old does a person have to be to invest?

Hay: Many brokerages allow you to have a custodial account to have your children start investing, which I think is a great idea because you can manage what they’re doing and then help teach them along the way. You can also start saving for their education through a 529 plan. One of the things I think is great is to empower them to learn and then show them how the markets work. There are a lot of fun ways to get them engaged. They can invest in companies that they care about or that they’re interested in or that they use.

Pro Tip

Read our ultimate guide to saving for college and beyond with a 529 Plan.

TPH: What is the best piece of personal financial advice you’ve ever received?

Hay: I have three pieces of advice I believe are really the most impactful. The first one is diversify — so don’t have all your eggs in one basket. The second is: Keep costs low. Many people don’t realize all the fees that we pay for, whether it’s for advisers or financial products. The third piece of advice is buy and hold. I’m a big believer in investing for the long run. One of the things that’s been proven over and over is the most solid and most reliable strategy is really to buy and hold. Most people shouldn’t be day traders and aren’t trained to be.

Audience Question: Do you have advice for transitioning from full-time employment to retirement?

Hay: It depends on what your time horizon is, what your investments are and what you have saved up for retirement. Most people have not saved up adequate money for their retirement and are depending on Social Security, which no one even knows if it’ll be there in the next 20 or 30 years. You want to be secure that you’ll have — from your retirement savings — enough to have the same lifestyle that you’ve had while working full time. If your company provides matching retirement contributions, make sure you take advantage of that. You’d be surprised at how many people don’t. Even if you’re saving later in life or investing later, it’s okay. Don’t worry about what’s happened in the past, but be proactive in the future.

TPH: What do you hope that people get out of reading “Napkin Finance?”

Hay: The beauty of the book is that I think it’s really comprehensive. It covers so many areas within money and finances — everything from taxes to retirement to credit. What we hope is that this book is a way for people to engage and get more interested in learning about money and use it as an opportunity to have discussions with their loved ones.

To listen to the conversation in its entirety, watch the Facebook Live replay.

Nicole Dow is a senior writer at The Penny Hoarder.

Source: thepennyhoarder.com