We
try to teach our kids to be
street-smart and use good manners, but teaching them the financial
facts of life can be difficult. Here are a few ideas to help parents,
guardians and even grandparents raise responsible money-managers.
Show your little ones how you manage your own
money. If you expect your kids to become responsible
with their
money ( and yours ) practice what you preach. Serve as a good
example
of what it means to save, spend wisely and share with others.
You’ll make more of an impression on your children if they can see and
hear what you’re doing to manage your money.
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So, take your child along on shopping trips and discuss what makes some items too expensive and others good buys. Also take your child to the bank. Note the variety of services provided by visiting different departments of the bank. Explain basic principles, such as how money deposited in insured accounts is protected by the government against loss.
Around the house, let your child help with simple
tasks associated with preparing deposits or investments, or balancing
the checkbook. As you pay your bills, especially the ones for your
credit cards, explain how debts must be repaid on time or you can face
additional fees and have trouble getting a good loan in the future.
Also discuss your charitable contributions and why you are making them. Ask your child for input on which charities to support. He or she also can help you prepare contributions, even if just by stuffing checks into envelopes.
Help your child start a savings or investment account. Young kids will
enjoy saving money in piggy banks, but at around age eight, think about
helping them open a small savings account. That way they also begin
learning what banking is all about. Many parents reward their children
for sticking to a savings plan by matching or adding to what the child
contributes.
As children get older, discuss the pros and cons of owning investments, such as stocks, bonds and mutual funds. Investments can produce higher returns than bank deposits over the long term, but remember that investments can lose money and they are not insured by the FDIC.
Give your children an allowance. If used as a teaching tool and not a
giveaway, an
allowance can be one of the best ways to teach kids, even as young as
five or six, about money management. It also allows children to
experiment with money management and learn from their mistakes without
losing too much in the process.
Encourage them to decide in advance how much should go into savings. Teach them to pay themselves first. And how much should go into their spending pile - or pocket money. Share with them how to set some aside to share with others for charity or birthday or holiday gifts. Giving an allowance in small bills or coins also allows them to easily set aside the portions for the different purposes.
Consider gifts that encourage saving. Examples include U.S. Savings
Bonds and books that reinforce financial responsibility. Teach your
children to start saving money early in
life!
Encourage older
children to get work experience. Summer or part-time
jobs can teach young people good business skills and how to be
responsible. They also may enjoy earning and saving money. Encourage
them to read - The
Motley Fool Investment Guide for Teens: 8 Steps to Having More Money
Than Your Parents Ever Dreamed Of.
