When it comes to parenting, there is an infinite amount of ways to teach your child lessons they will carry with them throughout their lives. A lesson often looked over by parents…money management. Like the old proverb says, give a man a fish, and you feed him for a day. Teach a man to fish, and feed him for a lifetime. The same concept applies to the way you approach money with your child. It is easy to simply give your child money, but teaching them how to manage it and make it grow will set them up for a lifetime of financial success. There are a few ways kids can be taught lessons about money. The following are three recommendations to get you started:
- Awarding Saving Behaviors: Many parents agree that giving their child an allowance for being responsible with household tasks is a good way of teaching them the value of the dollar. Kick it one step further and offer to give your child a bonus of 20% on the money from the last week they did not spend. You can choose to pay out the interest however often you want. The key is that they are rewarded for saving and they will see the results of that saving right before their eyes. They will get a couple extra bucks a week, which is a cheap way to have kids learn saving behaviors for the future.
- Visualizing Compound Interest: Go online and search for “investment calculator”. Ask your kid, “How much money do you think you will have when you’re my age?” Have them guess. Plug in the numbers for them with a 7% rate of return with $100 per week of savings. Show them and watch them be amazed. Also, show them what their money will look like at different ages. This will show them that money starts piling up after saving for a long time and you do not become rich overnight.
- Talk About Avoiding High-Interest Debt: Most kids do not hear their parents talk about money and that’s a shame. You don’t have to tell them personal details like how much money you owe but talk about concepts like how credit cards should be paid off every month or borrowing money to pay for a home. Tell them that you pay the credit cards on time to avoid high interest, but use a loan to buy the home because it is not as expensive. You will have kids that are financially mindful without being scared of healthy debt.
Now that you have these suggestions, I invite you to toss out any personal stigma or taboo that comes with talking about money in the family. Talk about how you got to where you are today. Talk about how your kids can strive to achieve greater wealth in their life. You will leave your kids grateful and financially safer than they would be without these discussions and lessons.