Good money management skills are essential to a successful life. As young people continue to grow their reliance on debt, it’s important that parents have open conversations with their children on money and debt. The earlier you start teaching children the value of savings, the better off they will be.
Open a Children’s Savings Accounts
Rather than paying a cash allowance, parents may want to set up recurring allowance transfers to their child’s savings account. This can encourage children to take an active role in managing their money while earning some interest as well.
Teach Your Children to Set Goals
Have your children categorize their goals into 3 categories – immediate, intermediate, and long term goals. Immediate goals, such as saving for a desired toy or a new video game help instill financial responsibility from an early age. Intermediate goals such as a musical instrument or an iPad can help teach the satisfaction of earning a reward. Lastly, long term goals such as a computer helps children understand the concept of patience and delayed gratification.
Have Open Conversations About Money
Use everyday life to teach lessons about smart money management. Your children will see you making purchases, but they may not see the impact of your savings behind the scenes, unless you make them a part of your conversations.
Be Smart with Cash Gifts
When your child receives a birthday or milestone gift in the form of cash from relatives, use this as a learning opportunity to grow their earnings – savings vehicles such as a high-yield CD, Health Savings Account, 259 College Savings Plan or Roth IRA are a few options to look into, depending on your savings goals and length of time to save.
Encourage Earning Income
Whether it’s a lemonade stand or a handmade craft, engaging in entrepreneurship or a part time job can educate your child on the concepts of profit, costs and the value of hard work. Plus, one study1 shows that teens early employment experiences can lead to long-lasting career benefits, such as higher hourly wages, increased yearly earnings and less time spent out of work.
The Bottom Line
Giving your children a strong financial footing involves a mix of patience, consistency and leading by example. and providing learning opportunities. By instilling good financial habits early on, you can empower your child to make informed and responsible decisions about money as they grow older.
1https://epionline.org/app/uploads/2014/08/EPI_LastingBenefitsofEarlyWorkExperience2.pdf