Teaching Kids About Money (7/28/2017)
One of the best gifts you can give children is to teach them the basics about managing money. If they can learn the discipline and wisdom involved in making wise choices at an early age, they could benefit tremendously in future years.
The prime time for a child to begin learning good financial habits usually occurs during the “tween to teen” years of adolescence according to Wealth Management studies. At this age, they are old enough to grasp basic concepts, but young enough to still listen to parents and other adults.
Building this foundation can begin as early as kindergarten. If the child understands the difference between a nickel and a dollar, they may be ready to receive a regular allowance for doing chores or extra duties around the house. The chores can be tracked with a calendar or dry erase board and then the child can see how the work is tracked and when he or she will be paid. Computer and phone applications are available to help with this, too. The child can learn that he or she will be rewarded for taking on responsibility.
As children obtain money from allowance, work or gifts, it is crucial that they understand the concept of spending only a portion of any income and saving the remaining portion for the future. The adult can help the child determine a fair balance between spending and saving and perhaps even donating to help the less fortunate. Jars, envelopes or piggy banks can help the child visualize dividing earnings into categories.
Another concept that would be helpful to learn at an early age is the power of time with money. Use a basic calculator could show how interest works on money that is saved. Many investing websites have calculators online that can show how money could grow on a monthly investment over time. Simple long hand on piece of paper can show this as well. Knowing the time value of money may help young workers to participate in savings and retirement programs when they become employed in the future.
Finally, building the basic financial blocks must include teaching how to limit spending. For example, if you give your child $50 toward sneakers and they would like a pair of $100 sneakers endorsed by a famous athlete, they will need to contribute or save $50 more for the fancier sneakers. You could show them the options for sneakers at a cost of $50 or below that may be the same quality of the more expensive pair. While they do have a choice, the fact that they must spend more for the endorsed sneakers is important to understand. You can also show them how to look for coupons or discounts.
Teaching the basics to children will encourage positive habits that continue into adulthood. Some may take in more than others but the chances for financial stability should be greater.
NOTE: Caroline Rose has left her position at Secure Planning to pursue her love for permaculture and crafting. Melissa Ireland, an experienced administrative professional, will be assuming Caroline’s responsibilities. We wish Caroline well in her new endeavor and extend to Melissa a warm welcome to Secure Planning.
Lisa A. Dugan
July 28, 2017