Tuesday, 29 September 2009 22:19
by
Andy M
If you have had the experience of watching your young children spend money the minute it hits their hand, you may be worried about their spending/saving habits when they are adults. Here are a few pointers to begin to teach them about being financially responsible.
Model Responsible Spending/Saving Habits – Children will learn from what they see you do. By budgeting monthly expenses and saving for large purchases, children will learn that you don’t just go buy something on credit until you have the money to pay for it.
Earn Spending Money – Rather than forking over an allowance every week or month, have a set list of jobs/chores your children need to do to earn the money. You can even set up a list that shows how much they earn for each job. Then add up the total amount you owe them on “pay day.”
Set Financial Contracts – Teach your children about financial contracts, such as loans, by lending them money for a larger purchase. Set up a loan repayment contract where they are expected to pay off the loan in a specified time period.
Open a Savings Account – Opening a savings account will teach your child that their money will earn interest on its own while it sits in their account. If they save enough, consider putting their money in a certificate of deposit and talk with them about the different ways to earn more interest on their money.
Set Goals – Help your children set goals for the things they want to buy. You can work with them on when they should be able to accumulate enough money to make their purchase and encourage them along the way.
Play Games – There are many games, such as Monopoly and Life, that teach children about managing money and saving for goals. For older children, try setting up your own stock market game where they can invest play money in stocks and track them over time to see if they earn or lose money. Choose some risky companies and some safe companies to teach them about the risks and returns involved with investing in the stock market.
I try many of these tactics on my own children. The jury is still out on how successful I’ve been. It seems that the result may depend somewhat on the individual child’s personality. Still, as a parent I want to do my best to instill in my children a solid understanding of money and finances so that they will become financially responsible adults.