From October 28, 2009
Even though it seems like money and financial topics are discussed everywhere, these are not concepts your children will learn automatically. Teaching your children basic money concepts, including the value of saving and investing, can benefit them for a lifetime. Some strategies to help teach these concepts include:
-
Impart
money concepts along with
the children's allowance.
You must
decide whether to tie your
children's allowance to the
performance of chores. Some
people feel that doing so
instills the concept of
working for pay, while
others feel chores should be
performed without pay as
part of a child's family
responsibilities. When
setting the allowance, make
sure the child understands
what expenses must be paid
with it. The allowance
should increase as your
children grow older and
should be large enough that
the children have money left
over to make their own
purchasing decisions.
-
Provide opportunities to
earn extra money.
Offer
to pay your children for
additional chores around the
house, so they learn the
connection between effort
and pay. Once your children
start working at a paying
job, go over their pay stubs
with them, making sure they
understand what taxes are
deducted for and how much of
their pay it represents.
Start teaching your children
ways to reduce their taxes,
such as funding an
individual retirement
account when they become
eligible.
-
Allow
your child to make financial
decisions.
You may
not agree with the choices
your children make, but they
should learn from their
mistakes. That doesn't mean
you can't discuss options
with them, but the final
decision should be theirs.
-
Encourage your child to save
money.
Saving
for tomorrow rather than
spending today is a
difficult concept for adults
as well as children. Thus,
you may need to offer
incentives to encourage
saving. You may require a
certain percentage of your
child's allowance be set
aside for long-term goals.
Or you can match your
child's savings, perhaps
contributing 50¢ or a dollar
for every dollar your child
saves.
-
Explain the basics of
investing.
At an
early age, open a bank
account for your child,
explaining concepts like
saving and compound
interest. Around age eight
or so, explain how
businesses operate and how
investors buy and sell
stocks. As their interest
grows, help them purchase
stocks with some of their
savings. Since minors cannot
own stocks, you will need to
purchase the stock as
custodian for your children.
Teach your children how to
research a stock, follow its
price, review its annual
report, and decide when to
sell.
-
Encourage your children to
take finance courses.
Many high schools and
colleges offer courses that
teach stock basics and
personal finance. Encourage
your children to take at
least one of these courses.
- Be conscious of the money messages you send to your children. Your children watch your actions closely, so how you treat money will be a significant influence on their views. If you make large purchases only after careful research and price comparisons, your children will learn to be careful before making a purchase. If you use your credit card cautiously and explain how to select a card, what items to charge, and how to pay off the balance every month, your children will learn not to abuse credit cards.
