Money influences everyone every day – not just adults. As children and grandchildren return to the classroom to continue their education and prepare for a successful future, we should not assume a deep financial education will be provided. While many schools have added financial literacy to the curriculum for older students, the reality is good financial principles can be taught at a much younger age.
You may be surprised that high school children claim that 88 percent of their financial education comes from their parents. Watching them deal with finances and taking cues from what they have seen and heard.
At a young age, you can teach children about money. An allowance is an excellent way for them to learn many important concepts. Here are some tips you can use to teach smart money principles.
Saving – Encourage them to save a portion of the money they get from an allowance, earned from chores, or from gifts. This will instill a habit of saving. It might not seem like much, but creating this lifelong habit can pay dividends for generations. A piggy bank is a great visual tool. They can see their money piling up. As they get older, opening a savings account is a great way to teach them about compound interest.
Spending – Knowing how to spend is just as important as saving. Living within their means is essential to financial well-being. Let’s face it, children live in a world that encourages them to spend money. Most know you can shop on your phone, buy with just a click, and your purchase will be delivered in a few days. Too often, spending goals take a back seat to immediate gratification. Teaching children to prioritize their wants and create a plan that allows them to spend a portion now and save for something they want will help them become savvy spenders.
Investing – Understanding the balance of risk and reward in investing is paramount at any age. Teaching children about investing and allowing them to experience the ups and downs of the market can help prepare them for long-term investment success. It may also prevent them from experiencing big losses. Children under 21 can invest money using a parent as the custodian. When they reach the age of majority, over 21, they become the owner of the account and can continue investing. It’s an excellent way to help fund education, save for a down payment on a home, or invest for the future.
Entrepreneurial opportunities – Help children find unique ways to make money using their talents and interests. They will challenge themselves, take risks as business owners, and enjoy the rewards of their efforts. This is especially valuable while living at home, where they have safety and security. They will also benefit from the support and encouragement you can provide.
Taking the time to teach children about money will help prepare them for a financially successful future.
