The 7 Best Steps to Take to Set
Your Children Up Financially
by www.SixWise.com
You've talked to your kids about not smoking, instilled the
difference between what's right and what's wrong, and perhaps
have even taught
them how to care ... but have you sat down and talked
to your children about money?
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Giving kids a choice of what to do with their money
(save, spend, invest or donate) gets them thinking about
money management right from the start.
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If not, you're not alone. Money, it seems, ranks up there
with drugs and sex in topics that parents avoid talking about
with their kids. Yet, according to a survey by the market-research
firm GfK NOP, two-thirds of teens count on their parents (not
their teachers or their peers) to teach them how to manage
money.
Not teaching your children how to look out for their financial
future is equivalent to "handicapping their children
for life," says one financial planner in a U.S. News
and World Report article. And it's easy to see why when you
hear some of the startling statistics revealed by the Gfk
NOP survey:
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More than 1 in 5 teens didn't know that you have to pay
interest if you borrow money.
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Less than one-third of teens knew how to make a budget.
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Only 36 percent knew how to open a savings account.
While talking to your kids about money is one important step,
there are other, more action-oriented variables to giving
your kids a good financial start. Simply taking the time to
do the following tips below can mean the difference between
financial success or failure once your children become adults.
The 7 Things You Need to do for Your Children's
Financial Future
1. Talk to Your Kids About Money
More than one-third of kids said their parents rarely or
never discuss finances with them, according to the Gfk NOP
survey. How, then, are they ever going to learn about them?
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If your child spends all of his saved money, don't
give him anymore until he earns it (or his allowance
comes). This way, he'll begin to see the importance
of sticking to a budget.
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You should involve your children in financial discussions
from early on. When they're young, teach them how you buy
things at the grocery store (do you look for sales? Only come
with $60 in cash so you don't overspend?) or give them a couple
of dollars they've earned to spend as they please.
When kids get older, let them in on your
budget (you do have one, right?) and talk to them about
why you decided to allocate certain amounts to certain expenses.
Let them in on how much is coming in each month, and how much
you've budgeted to go out, so they know WHY you're not always
willing to buy them designer jeans or shoes.
2. Give Young Kids an Allowance, Older Kids Money for
Chores
When kids are too young to really "earn" their
money, it's OK to give them a small allowance. For older kids,
teach them the value of working for their money, and reward
them accordingly. High school kids should be encouraged to
get part-time jobs.
Now, when you give your kids their allowance, make sure you
discuss it with them. Ask them how much they think they should
save, how much they should donate to charity, how much they
should spend and how much they should invest.
Though it can take some work to get kids to think about saving
money, tools like the award-winning
Money Savvy Pig piggy bank are a fun way to get kids,
even those who are really young, to grasp this concept. The
Money Savvy Pig -- there's also Moohla
the Money Savvy Cow -- has four chambers, one for each
of the "money choices" (save, donate, spend, invest)
that children have when they earn or receive money.
These banks work so well because as kids make choices about
what to do with their money, they're able to actually see
the results.
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The Money Savvy Pig & Cow Piggy
Banks
Winner of the Parents' Choice Foundation Gold Award
and honored as a USA TODAY "Product of the Year,"
the engaging Money Savvy Piggy Bank and Moolah Cow Bank
will teach your kids more about money in a few weeks
than your parents ever taught you! That's why it has
been recommended by so many other major media too, including:
- Daily Herald
- Bloomberg.com
- Baltimore Sun
- BlackAmericaWeb.com
- Wall Street Journal
- Parents' Choice Newsletter
- Journal of Financial Planning
- CBS MarketWatch
- MSN/Money
- Chicago Tribune
- SFO Magazine
- Real Estate Business
- Chicago Parent
- Journal of Financial Planning
- Crain's Chicago Business
- San Diego Union-Tribune
- Arizona Republic
Read
More Now!
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3. Open a Savings Account for Your Kids
When kids are about 5 years old, they're old enough to have
a savings account. Make an event of going to the bank with
your child and opening an account for them. As they get money
for their birthday, chores or other reasons, and the "Save"
chamber of their Money Savvy Pig begins to overflow, take
your child to the bank and have them deposit their money.
As your children get older, this account will have grown
considerably, giving them a nice savings when it's time for
college. Before that, use the savings account to help your
children decide on some short- and long-term goals (such as
buying a bicycle, a car or helping to pay for college).
4. Open a College Fund
Experts say you can start saving for your child's college
education as soon as you're expecting. The earlier you do
so, either by investing small amounts each month to mutual
funds or allocating a certain amount each year to a government-run
529 College Savings Plan, the easier it will be to save up
(and the less likely you are to get sidetracked with other
expenses).
When the time comes for college, of course, don't overlook
other sources of financial aid like scholarships
and loans.
5. Let Your Kids See the Bills
It can be difficult for kids to grasp how quickly purchases
add up. Let them see your credit card bills, utility bills,
car payments and others so they get an idea of just how much
things cost. Most kids will be shocked at how much you pay
each month just for the necessities.
6. Be a Good Role Model
If your kids see that you're constantly spending more than
you earn and not keeping up with bills, they are likely to
repeat this scenario when they're older. Making sure that
you stick to your budget and save each month for emergencies
will set a good example for your kids.
7. Discuss Career Choices
Once your kids get older, talk to them about how much money
they'd like to earn each year, and see if it corresponds with
their career choices. Charles Schwab's annual "Teens
and Money" survey found that teenagers expect to earn
about $145,500 a year, so it's important to sit down and discuss
the real amounts they can expect to earn from different jobs.
Recommended Reading
The
10 Dumbest Everyday Mistakes People Make With Their Money
Kids
and Money: 5 Keys to Teaching Kids Money Management Skills
Sources
U.S.
News and World Report
CNNMoney
Forbes.com
PracticalMoneySkills.com