How You Can Teach Your Children Financial Sense
While many readers of this blog are in their 20s and do not have children yet, many or most of us will one day. Also in knowing some sound financial teachings that will be conveyed to children help us to remember them as well as put them into practice.
The best thing any parent can do for their children is teach them how to save money. Parents should start as early as possible such as when children start earning an allowance. As soon as children have available pocket change start encouraging them to put the change in a piggy bank or open a savings account. Make a suggestion to start saving for a special toy they want or an event they want to go to. Children can learn an important lesson from this such as being accountable for their money and understanding the responsibility of handling it. Your children can use a picture of the item they are saving up for and you and your children can create a sheet that marks the target amount and how much they have saved so far.
Parents can help their children achieve their money goals by creating a reward system. Children can earn bonus money by doing chores around the house, keeping their room clean, earning extra credit in school and various other ways.
As your child earns more money sit down with them and read the financial section of your local newspaper. You and your children can read the investment section or the stocks section and they can choose a share of stock they can invest in. This teaches them how to invest the money they earn while they learn how to make that money grow. For parents that have older children this is the perfect opportunity to teach them the stock market and learn how to follow trends, study competitors and how to trade stocks.
For parents with younger children you can start with rewarding them for keeping their room clean and picking up their clothes. You can also assign small chores such as taking out the garbage, washing dishes or even taking the dog for a walk. For each chore they do correctly you can create a reward system. Make a list of each chore they do and how much they earn for that chore. This makes it fun for them to do chores around the house as well as earn money to buy their favorite toys or other items. To make it even more special take them along when you go to the bank and help them open their own savings account. Watch their faces as they hand the teller their money to deposit into their account. Children can also keep their money at home in a piggy bank or special container that they choose for their money. Be sure to keep the container locked so they can only put money in and not take it out. When they have reached the target amount they need for a special toy or other item give them the privilege of opening the bank or container.
Other issues that need to be taught to children as they mature and are old enough to understand is that of borrowing money. This applies more to the teenage years and beyond but good teachings can start before they need them. There are several ways to borrow money and what constitutes as a good borrow compared to a not so good borrow. A house mortgage for example can be a good borrowing opportunity if the payments can be kept up etc. Also taking out a loan to get further education can be advantageous. Some loans too come with high rates of interest and should only ever be used in an emergency. Cashwindow for example offers short term loans but does a good job telling their clients what exactly they are getting into and to use them wisely. There are other financial teachings that make sense to tell your children about in their teen years such as credit, compounding interest, types of investments etc.
All children need to learn how to save money and know what to do with it. When parents start early it will be much easier for them to save money as adults. Saving money with today’s economy is essential no matter how old you are.