Life off duty: 6 tips for teaching kids about money
Parents must teach their children financial literacy by setting a positive example
William Lowndes once famously said, “Take care of the pence, and the pounds will take care of themselves.” He could have been talking about anyone, but I’d like you to think for the purposes of this article he was talking to our children.
Long before most children can add or subtract, they become aware of the concept of money. Any four-year-old child knows where their parents get money — the ATM, of course. Understanding that parents must work for their money requires a more mature mind, and even then, the learning process has its wrinkles.
The Financial Planning Association offers a few suggestions for parents that want to help their children with basic financial literacy.
1.) Buy a Piggy Bank
This isn’t about buying stuff.
It’s about setting goals.
2.) Don’t Miss Teaching Opportunities
“I want” and “I need” are always opportunities for you to teach.
Some pretty serious money issues can come out of the mouths of babes.
Listen to them.
Also, teach your kids to make spending “wish lists” throughout the year — these are not only lessons in delayed gratification, but also in prioritizing needs and wants.
3.) Open a Savings Account
Make sure they keep their bankbook or monthly statements in a safe place, and make sure they deposit funds at least once a month to get in the habit. You might also consider mutual funds geared toward children — the best ones have great educational value.
4.) Handle Money Mistakes Carefully
It is generally a good idea to ask the child whether that was a right use for the funds and what they might do the next time.
5.) Be Open About Investments
Start talking about why you buy stocks, bonds, or mutual funds to help pay for their education. If your child asks you to buy a book or subscribe to a magazine or newspaper so they can learn more, don’t think twice — just do it.
6.) Talk About College Early
You can also talk about whether your child will have to pay any expenses on their own and how they will earn the money. The massive investment college represents presents a great opportunity to discuss what the most important things in life really cost.
Why Financial Literacy?
Cecilia Shiner, senior analyst at LIMRA Retirement Research, recently stated that “improving general financial literacy could lay the groundwork for retirement knowledge. Too few consumers understand basic financial concepts and this lack of knowledge can hinder their savings efforts.”
Ms. Shiner noted, “There’s a lot of attention on the baby boomers (78 million) but there are nearly 116 million Americans aged 20 to 47, and as an industry we need to help these Americans plan and save for retirement.”
Given the fact that millennials represent 116 million Americans, it is imperative that basic financial literacy for children begins at home.
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