This year many families are faced with unprecedented financial challenges. Our early experiences with money set the tone for how we approach career, spending, debt, and ideas about wealth. Financial literacy is not taught in schools but is a major indicator of wealth creation.
We’ve taught them how to ride a bike, how to read, but have we taught them how to manage money? Without the proper education in dealing with money, children are at risk of becoming financially irresponsible in life. By engaging your child about how money works, save them and yourself some heartache by teaching them the basics of smart money management.
Have The Conversation - The best time to start teaching your kids about money is the age they begin to count. Start by identifying, sorting, and counting coins. Play games like “Store,” where kids exchange money for items, introducing them to the basics of shopping and also saving. It’s never too late, even for older children, but start today.
Let Them Spend It – An allowance helps teach the relationship between work and money. Age 6 or 7 is a good time to begin giving your child a small allowance and an opportunity to teach money management and good savings habits. In addition, youth checking accounts (start for children 13-years and older at most financial institutions) are practical and make sense for young people around the time they enter high school, get their driver’s license, and get their first job.
The Power Of Interest - Encourage savings by matching what they put into a savings account and let them see how interest grows their money over time.
Start a Bucket Approach to Savings - Where a portion of each allowance is set aside for a future goal. This will teach them how to allocate between various objectives.
College – The Power Of Time - Set up a 529 College Savings Plan for them and show them you are actively working towards a common goal. Children are much more likely to go to college if they know you have been planning for it.
Don’t Bail Them Out - If you loan them money, make them pay it back with interest. Create an IOU. What they learn, and you teach them, about the cost of money could pay them back later in life – when it really matters. (Ballard Financial Group | Chris Ballard, CFP® | 352-404-9990 | www.BallardFinancial.com)