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Nine Tips for Raising Financially Literate Children
Michelle Samaad (bankrate.com)
Tips for teaching your children about money
You try to raise your children right and teach them values, and while morals
and ethics are important, it’s important to be sure children learn about
money and finances. Here are some tips for parents to help their children
learn about how to manage money.
Tips for teaching children about money
1. Get kids interested in money early.
When your children are very young (age 3 or 4), show them how to tell
different coins apart. Then give them a piggy bank to store up their change.
Piggy banks are a tangible place to keep their money safe, and they can
see, hear and feel how the bank fills up.
2.Make saving a habit.
Make a house rule of saving a percentage of income, whether it’s birthday
money from relatives, earnings from a neighborhood lemonade stand, weekly
allowance or a part-time job.
3. Open a savings account in a child’s name.
A bank savings account can show kids how their money can earn money
on its own -- through compound interest. Give kids a compound interest
table (available at most banks) to let them anticipate how their money
can grow. Be sure to plan regular visits to the bank, too.
4, Encourage goal setting.
Have your kids write down their wish list, along with a deadline --
a skateboard by the end of the summer, a bike by next year. Visualizing
may give kids the added motivation they need to save. You might also contribute
a matching amount every time they reach a certain dollar amount in savings
by themselves.
5. Give regular allowances.
Allowances give kids experience with real-life money matters, letting
them practice how to save regularly and plan their spending. Of course,
you should determine the amount of allowance that you think fits, for example
an amount equal to half their age per week.
6. Help plan a budget.
Have kids write down what they’ll buy during the week and how much
each item costs. Then write down their weekly income. If it doesn’t add
up, they’ll have to prioritize their "needs" and their "wants."
7. Encourage money-earning ventures.
To earn money beyond their weekly allowance, suggest that kids find
creative ways to make money -- doing special household chores or seeking
jobs in the neighborhood such as raking leaves, mowing lawns, pet sitting
or shoveling snow.
8. Show children the effects of inflation.
To show your kids how prices have gone up over the years, take them
to the library to look up ads -- for movie tickets, bikes, sneakers --
in the newspaper archives. Try finding the year they were born. Your kids
can also use their math skills to see how much items they’re saving for
will cost in the future. For example. a bike that costs $50 today might
cost $60 in five years, with 4 percent inflation.
9. The ultimate step to investing: stocks.
For a fun way to teach kids about stocks and how they work, make a
game of it. Have everyone in the family pick their favorite company --
McDonald’s, The Gap, Walt Disney, Nike -- and "invest" $100. If you own
mutual funds or variable annuities, you can let your kids find a name they
know in the annual reports. Then show your kids how to keep track of the
stocks’ daily progress through the newspaper’s financial section. Give
a prize to the person whose stock goes up the most over each month.
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