How to Put Kids on a Path to Financial Success
No matter how old your kids are, it is never too early to begin them on a path of financial success. What you do and how you do depends greatly on their age, but starting with the basics early will teach them the habits they need to make good financial decisions when they are grown and working for themselves.
When your child is a newborn
Obviously at this age there is no need for any financial education, but it is a good time to start saving for your child’s future. Opening a high interest savings account for them is a great way to earn them a little money as they grow up. With regular deposits into this account and the high interest it can earn, you can grow a nice little nest egg that they can use while in college or for other large expenses when they first strike out on their own.
In addition to a savings account, it is a good idea to also start thinking about college. There are many types of college savings plans out there like the 529 savings plan that can help you save money for the expensive tuition fees you will see while they are in school.
Children age 3 to grade 2
It doesn’t take long before kids learn what money is and how it works. While at this age they aren’t ready for the complicated finance terms like compound interest or bank accounts, it is the perfect time to begin teaching them the value of money. Give them simple tasks to accomplish and pay them for their efforts so they learn about working for what they get. Let them take their money to the store with you and allow them to buy something so they can begin to understand how much money it takes to buy certain items.
At the same time, you should also begin teaching them the benefits of saving and planning purchases in advance. Encourage them to save a little bit of the money they earn so they can buy something more expensive at a later date. Start simple and be patient. Most likely your kids will want to spend every cent they earn as quickly as possible and they might even get upset if you don’t let them. Use those moments as an opportunity to show them the benefits of saving.
Children grade 3 to middle school
As your child grows, their understanding will as well. Beginning at this age, you should begin to enforce the basics that you have taught them about earning money and saving. Chances are at this age they will want something that can be considered a big-ticket item like a television or even an iPod. Use these desires to enforce the value of money and how much things cost. Help create a saving plan to save up for these items to buy.
At this age, their math skills will be developed to the point where they can begin to understand the basics of a budget and how to keep track of their money. Help them create a budget based on their jobs around the house or allowance and encourage them to save part of the money they earn each week. Teach them what it means to save for larger items and show them how sometimes you have to give up something in order to get something else down the road.
Children in high school and college
Now is the time to begin true hands-on lessons about money. At this age chances are your kids are off looking for their first job. When they get their first check, sit down with them and go over each part of the check so they understand what has been deducted. Now is the time for them to learn the essentials to taxes and Social Security. This will help them understand how to calculate how much they make in the future.
If you think they are ready, consider opening a joint checking account with them and teach them how to manage it properly so they can avoid those costly negative balances. Teach them how to write a check and balance a checkbook so they are ready to handle themselves in the real world of finance. At the same time, go over the details of their savings account and encourage them to begin saving for a rainy day now.
It is never too early to start your child down the right financial path. Beginning early will allow you to start saving for future expenses on things like college tuition and it will help them learn the true value of money and how to handle it responsibly. The more you focus on money and saving when they are young, the better chance you have at creating an adult that is responsible and sensible with money giving them a head start when they head out your door and into the world on their own.