Q: Why is it important to teach children about money?
A: Many young people make mistakes with their money. But they could be helped if they learn early the importance of prudently using credit, the benefits of paying themselves first and the value of learning to be an entrepreneur. (My son recently sold one small LEGO pirate figure for $85!)
Q: Why learn basic investing concepts at a young age?
A: The power of compounding can be amazing! An account that averages 6% per year will double every 12 years, so each 12-year delay in getting started eliminates a full doubling period. It’s called the rule of 72.
Q: Why do so few investors achieve high investing performance?
A: Most investors rely upon emotions instead of intellect. We can help our children build a solid financial future by teaching our children the rule of buying low and selling high—that downturns are inevitable, but are actually NOT the time to sell, but rather an opportunity to pick up more shares at a discount.
Q: What basic concepts should we teach our children and how soon can we start?
A: Begin to employ financial principles for children as early as age 7 or 8. Children should learn about the value of earning money (i.e., allowances paid only after chores), spending only after they have earned money, using credit wisely and taking advantage of employer retirement plans from day one. Their future financial freedom will come primarily from their personal spending and savings habits and not from government programs or inheritances.
Q: What resources are available to help us teach our children about money?
A: We’re happy to provide a list of excellent books and videos. Perhaps the best resource, however, is to model prudent financial strategies. Show them your paystubs. Explain the impact of taxes and the cost of insurance. Go through an investment statement to teach about diversification and running a business. Help set up an investment program. Let them pick stocks that relate to their interests. Teach them to put some money away from every gift or paycheck. As they get older, consider gifting shares of stock or mutual funds.
At Ascent Financial Group, our mission is to help people of all ages learn and employ strategic savings and investment strategies to help reach their financial goals.