The first thing my 9-year-old son does when he gets birthday or Christmas money is jump on Amazon or leaf through toy catalogues to see how quickly he can spend it. This is not unlike the feeling many of us had when we got our first paychecks. The idea of putting away some of what you have today for tomorrow is not always instinctive and many times has to be learned.
We have always been told that children learn by example just as much as, if not more than, lecturing or preaching. This applies to household spending and savings habits as well.
If your children see you or hear you talk about saving on a regular basis, they will be more likely to do so themselves. The same can be said for budgeting for big ticket items like family vacations or home improvements. This is not to suggest you tell your children exactly how much money you have or how much you paid for everything. Rather, involve them in the process of saving, budgeting and planning for both the short and long term as they get older and more independent.
Teaching your child to set aside a fixed percentage of the money they are given or earn is one way to help start savings habits early and enforce math skills to boot! If you make it reasonable – say 20 percent – they will quickly understand that they still have 80 percent left, which is plenty to enjoy. The idea of both short- and long-term savings can also be helpful, especially if they have something special they are yearning for.
Children and teenagers often have difficulty thinking past the “here and now” so it is normally easier to start with things they can relate to. If your daughter really wants a new cell phone, sit down with her and work through how much she has to save each week or month to accumulate enough to buy it and still have funds left over for a later purchase. This may motivate her to do some extra chores around the house or opt in for more babysitting jobs instead of watching more television!
It also benefits kids to go with you while you make the savings deposit into a bank or credit union or watch while you send funds electronically to a savings or investment account. Once they are able to understand the concept of saving, share with them the earnings they accumulate in their savings and investment accounts. Have your teenager pick a company whose name they are familiar with and have an interest in and make a game out of tracking the stock price regularly. Did the stock pay a dividend? Did its price drop significantly? Help them to research what happened and why.
Encourage teenagers who are of high school age to take a basic finance class. Learning early how to pay a bill and balance a check book can save aggravation and frustration later and help give them the feeling they are more empowered to manage their own money. Just like anything else, some kids will take to this better than others but it never hurts to start early.
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