As a parent, you care about the well-being of your children and you want only the best for them, both now and in the future. You know your job is to prepare your son or daughter for the next stage in life, and that includes knowing how to save, invest, and handle money.
If you want to prepare your child for success in all phases of their life, providing them with a basic monetary education is essential. Here are 10 things you can do to raise fiscally smart and financially savvy children.
Offer to match their savings. Now that the bank account has been opened, it is time to fund it. Offering to match the amount your kids save, either on a dollar per dollar or a percentage basis, is a great way to encourage fiscal responsibility in
- Talk about the family finances. It is easy for parents to avoid financial discussions with their children, but kids pick up more than they might know. You do not have to go into detail but talking openly and honestly about money is always a good place to start.
- Find ways to let your kids earn their own money. If you want your kids to care about money, letting them have some of their own is a great first step. From mowing lawns and shoveling snow to starting their own kid-friendly business, there are plenty of ways for children to earn while they learn.
- Set savings goals. Having a goal to meet when saving will give your child something to work toward and provide a valuable lesson for later in life. You can incentivize savings further by offering a bonus or matching program, similar to a 401(k) program from an employer.
- Open a bank account with your child. Even in the age of digital money and smartphone apps, there is still a place for the good old-fashioned bank account. Opening a savings account with your child is the perfect way to teach them about responsible finance and how money really works.
- Offer to match their savings. Now that the bank account has been opened, it is time to fund it. Offering to match the amount your kids save, either on a dollar per dollar or a percentage basis, is a great way to encourage fiscal responsibility in your offspring.
- Discuss the difference between wants and needs. The ability to distinguish wants from needs is a basic cornerstone of smart finance, and it is a lesson parents can impart early in life. Talking about the difference between needing something and simply wanting it is essential, so start this discussion right away.
- Break down wants into hours worked, not just dollars spent. If your child has been bugging you for a new iPhone or another big-ticket item, try presenting that purchase in terms of the number of hours they would have to work to earn it. This can be especially educational for young kids, who may not previously have made the connection between money and work hours.
- Give kid-friendly shares of stock. The stock market is not exactly exciting to most children, but you can spice up the world of investing with the gift of a kid-friendly stock. A single framed share of a company they are familiar with is a great gift, and an even better incentive to learn about the market and investing.
- Let them make their own mistakes. Your child is bound to make some mistakes along the way but letting them learn hard lessons now when the stakes are small is much better than waiting until there is far more on the line. If your child does mess up with money, avoid the instinct to bail them out – let them learn this important financial lesson.
Financial literacy has never been more important, or more lacking. Survey after survey has shown that even working adults often lack a basic understanding of how interest rates, investments, and other financial tools work.
If you want to put your own child on the right financial path, starting early is always a smart move. Children are more financially savvy than many parents realize and imparting the right lessons now could prevent them from learning the wrong ones later.
