Your Child's Financial Plan

I know you've got your retirement plan all set, right? You know how much is in your various accounts and how much your nest egg needs to grow to by the time you retire. You know you've got your money invested as sensibly and effectively as possible. Right? I knew it -- good job!

But hold on there. Sure, you might have a great retirement plan. But how about your kids? Or your nieces or nephews? Or the charming young person next door who helps you out now and then? Have you helped any of them get their fiscal ducks in a row? Well, if not, it isn't too late.

Never too young
At the allfinancialmatters.com blog, I recently ran across an inspiring letter sent to a 14-year-old daughter. Her parents laid out a master financial plan in this letter. They started out by congratulating their daughter for having saved and accumulated $1,000 over three years, and then they explained how she did it and how she can save even more in the years ahead. Explaining that she's earning 3.75% in an ING bank account right now, they summarized several investment options but pointed out she can soon transfer much of her money into the Vanguard Target Retirement 2045 (VTIVX) fund, which is 88% in stocks and 12% in bonds.

I'll quibble with that allocation as a recommendation. If you're 14, it might make more sense to have all, or at least nearly all, of your long-term money in stocks. But still, choosing a Vanguard fund is smart, since they tend to sport very low fees. This one's expense ratio, for example, is 0.21%, compared with fees of 1%, 2%, or even more for many other funds. This fund will also have her invested in a broad array of indexes from around the world, including developed and emerging markets alike. With holdings such as Johnson & Johnson (NYSE: JNJ), BP (NYSE: BP), China Mobile (NYSE: CHL), and BHP Billiton (NYSE: BHP), you can get instant diversification.

The parents then show their daughter how she'll eventually make more than a million dollars, relatively painlessly. I can imagine that this kind of information can help inform a child's financial decisions for the rest of his or her life and can help the child become a responsible saver and spender.

The letter is long, but it's well worth reading. It might inspire you to offer a similar letter to your own beloved youngsters, or it might actually just teach you a few things -- or at least reinforce some critical concepts.

Here are some other things you can do:

• If you'd like to make some young people you care about more financially savvy, you'd do well to send them to our Teens and Their Money nook.

• As an alternative, consider giving them a copy of our well-regarded Motley Fool Investment Guide for Teens book.

And if, by some remote chance, you haven't gotten around to developing a retirement-saving plan for yourself, let us help you. I encourage you to take advantage of a free 30-day trial of our Rule Your Retirement newsletter service. It will give you full access to all past issues, where you can gather valuable tips and even read how some folks have retired early and well. It regularly offers recommendations of promising stocks and mutual funds, too.

Longtime Fool contributor Selena Maranjian owns shares of Johnson & Johnson, which is a Motley Fool Income Investor recommendation. China Mobile is a Global Gains pick. Try any one of our investing services free for 30 days. The Motley Fool isFools writing for Fools.