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The following post is by MPFJ staff writer, Shondell of Call Me What You Want, Even Cheap. She blogs about her recent car loan and mortgage pay off and a whole bunch more. Check out her blog right here.
In a national survey by Ipsos America Inc., a top-notch research company in the field of finances and marketing, it was found that 89% of the parents in the United States consider themselves important contributors in the financial management skills of their children and in raising money-smart kids.
Jessica Cecere, regional president of the South Florida branch of the nonprofit credit counseling and education organization called CredAbility, supports this. Every time the counselors assist their clients in managing their finances, they would always say something along the lines of “I wish somebody had taught me this when I was younger.” Brad Smith, president of BMO Harris Bank in Kansas City, says “it’s never too early to start talking to your kids about money and the world of finance.” He adds further that “financial learning should start at home. Even very young children can learn basic money skills, while older children can be taught about the stock market and the importance of setting financial goals.”
Though financial responsibility can be learned in school (but it is not often, if ever, taught in US schools), it is important for parents to instill the value of money themselves. This way, the children can develop good financial habits as they grow up and avoid getting into financial trouble as an adult when the economy becomes tougher and when the unemployment rate goes up.
Raising money-smart kids should start as early as possible, with the simplest yet most effective steps like the following:
1. Save with Piggy Banks
Piggy banks may seem trivial, but these toys provide the first lessons in saving and learning the value of money. Cecere of CredAbility says “when children are 5, 6, and 7, they can’t really understand the idea that one day something may happen, and you may need to rely on your savings. But, if somebody has a habit of saving and they always have, they will get that when they need it.”
It is also advised to teach them how to separate and compartmentalize their savings to effectively budget what money they have on hand. Three separate piggy banks labeled “give”, “save”, and “spend” not only budget their coins but also teach the lessons behind each term—giving, saving, and spending.
On a larger scale, these lessons can be helpful once they are taught the importance of contributing financially to the household. The parent`s occupations can be used as a jump-off point for this discussion. Aside from learning the value of saving their own money, the children will understand the hardships behind earning and this will, in effect, teach them not to ask their parents to spend money on unimportant material things.
2. Open a Bank Account
After the simple lessons of piggy bank savings, the child may be ready to have his/her bank account. As parents, you can open a savings account on their behalf and teach them how they can earn interest. After they have regularly set aside their money for saving, tag them along to the bank and deposit the money in their account. It is important that they be familiar and comfortable inside a bank even at an early age.
3. Have an End Goal
Saving money can be easier if the kids have specific items to save for. For example, if they ask you to buy a bike, you could say that they can save for it themselves from the cash gifts that they get for their birthdays. These goals can even push them to get a summer job and earn their own money for something they want.
4. Take them Shopping
No, not for toys, but to buy groceries for the whole family. This will give them a picture of how much money is spent on everyday necessities. This will also show them how much they need to spend for day-to-day living and how much they need to save to purchase luxuries if they want to.
Cyndi Finkle, mother and blogger of “Practical and Meaningful,” shares a tip: “Send your kids to one section of the market with a list of fruits and vegetables that you want and give them $20 to spend. They will ask questions and figure out how much of each thing they can get and start to understand the principles of money.”
5. Talk investments.
After learning the ropes of saving and banking, a young adult should be ready to learn about investing.
Educate him/her with the concepts of buying stocks and a balanced investment portfolio. Teach him/her that the newspaper’s business pages should not be ignored as it contains the stock prices that he/she needs to learn how to read. Give him/her tips on risk-taking when it comes to investments, making informed decisions based on previous stock prices, and observing price changes over a span of a week. It is best to cite companies he/she is familiar with as examples, like McDonald’s or Disney.
After tracking a company’s stocks for some time and with a small sum of money in the bank, a young adult can now consider an actual investment. Lay down the various investing instruments that are available. Encourage them that investing at an early age can result to more money in the long run and that this can help them pay for college or even a car after graduation.
How about you all? What are you doing to teach your kids about money?
***Photo courtesy of http://www.callmewhatyouwantevencheap.com/wp-content/uploads/2012/11/money-smart-kids.jpg