Most of what children learn about managing money comes from their parents, and we all hope our offspring will grow up to be financially responsible adults. Here are some ways you can teach your kids to save and instill a healthy dose of financial responsibility they can carry with them into adulthood. Keep in mind summer break is a great time to supplement what our children learn in school.
- Start Early. Even very young children can learn to tell different coins apart. Give them each a bank and teach them to deposit coins and watch their banks fill up.
- Make Savings a Habit. Encourage children to save a portion of their income—even if it’s only a small amount from a monthly allowance, earnings from a lemonade stand, or a part-time job later on.
- Give Regular Allowances. Allowances give kids the chance to manage cash hands on, a chance to practice how to save regularly, and plan their spending. Of course, the amount should fit the child and be determined by you.
- Open an Account in Your Child’s Name. Savings can show youngsters how their money can earn more money through compound interest. They’ll also see their funds are in a safe place, recorded, and available when they need it. Regular deposits, however small, will help them feel comfortable handling their own accounts. Referring to their statements reminds them their savings are there and growing.
- Help Plan a Budget. Have your kids practice writing down what they’ll buy during the week and how much each item costs. Then, suggest they compare the list to their weekly income. If it doesn’t add up, they’ll have to prioritize their immediate needs and wants.
- Encourage Goal Setting. Help your kids acquire the planned savings habit by helping them make a wish list and a schedule for saving, with a target date for acquiring the wished-for items.
- Acquaint Them with Stocks. Make a game of teaching kids about stocks and how they work. Have everyone in the family pick a favorite company and “invest” $100. Show them how to keep track of the stock’s daily progress through the newspaper’s financial section. Explain stocks represent ownership in a company. Then describe how the price of a stock generally follows the company’s progress and how—as the company’s fortunes rise—so, potentially, does its stock.
- Encourage Financial Reading. As your children grow older, provide financial magazines and discuss investment choices. Invite them to meet your financial advisor and to attend investment seminars with you. IBI
