How To Teach Kids About Money
By Michael Leanza, CFP®
As you prepare to have your children home from school for summer break, you may be wondering how to introduce or extend a conversation about the value of money and saving. Educating, motivating and empowering children to become regular savers and investors will enable them to keep more of the money they earn and do more with the money they spend. In this three week series we’ll explore simple ways to help educate children about personal finance and managing money. Let’s begin with the basics.
•Communicate with children as they grow about your values concerning money
How to save money, how to make it grow, and most importantly, how to spend it wisely are all important factors to share with your children.
•Help children learn the differences between needs, wants, and wishes
Identifying these three elements will prepare them for making good spending decisions in the future.
•Setting goals is fundamental to learning the value of money and saving
Young or old, people rarely reach goals they haven't set. Nearly every toy or other item children ask their parents to buy them can become the object of a goal-setting session, helping children learn to become responsible for themselves.
•Introduce children to the value of saving versus spending
Explain and demonstrate the concept of earning interest income on savings. Consider paying interest on money children save at home; children can help calculate the interest and see how fast money accumulates through the power of compound interest. Later on, they also will realize that the quickest way to a good credit rating is a history of regular, successful savings. Some parents even offer to match what children save on their own.
Laying the foundation for healthy personal finance habits is an integral step in your child’s financial future. Next week we’ll talk about the allowance and spending decisions that help children develop and grow these habits.
Source: Brought to you by National PTA® by Paul Richard
Adapted from "Dollars and Sense," in the April 1999 issue of Our Children, the official magazine of the National PTA®.
Paul Richard is executive vice president of the National Center for Finance Education (NCFE), a nonprofit organization dedicated to helping people learn to manage money.
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