As a parent, you’ll probably provide your children with their first and most impactful lessons on handling finances. Give them a good financial foundation by introducing them to three basic principles:
SAVE for your future, SPEND appropriately, and SHARE for the greater good of others.
Q: How early should I begin teaching my children to save? And how?
A: Help them learn the benefit of saving as soon as they understand the value of money. When they receive cash gifts from others, are paid an allowance, or even find money on the sidewalk, encourage them to save at least a portion of it.
Youngsters can physically see their “cash” savings grow as they feed a piggy bank. Establish checking or savings accounts for your older children and teach them how to track the balance. Once an account reaches $1,000+, consider helping them invest a portion of it so they can also experience the value of investing. It’s easier to motivate children to save when they can see their dollars grow. You know you’ve done a great job when it becomes a habit!
Q: What are “smart spending” principals?
A: Teach your children good spending habits by giving them an allowance to pay for small, non-essential items. Introduce budgeting by comparing this “income” with the cost of the items they want. If their wants exceed their allowance, and they likely will, it’s an opportune time to talk with them about prioritizing and making good spending decisions.
As children get older, consider giving them a monthly allowance to use for clothing and entertainment. This will challenge them to make wise decisions on how to spend their money. If they fall short, don’t give them extra money no matter how much you are tempted to do so. This is an opportunity for them to learn to make good spending decisions and to save for the future purchase of bigger-ticket items.
Q: How can I get my children involved in philanthropy?
A: Most children find happiness in picking out a gift for a parent, sibling, or friend. You can build on their love of giving by helping them set aside a portion of their allowance for these gifts. Encourage your older children to give to a charitable organization in which they have a special interest. This not only allows them to see the value of their gift, it can give you insight into special interests you may not have known they had. Contributing some of their own savings may be tough initially, but once they see the positive impact of their giving, it may become addictive!