TEACHING YOUR KIDS ABOUT THE POWER OF BUDGETING AND SAVING
Our children see us spending money on just about everything as they grow up—vacations, toys, household items, vehicles, lessons, sports gear and costumes, electronics, and the list goes on. So what are we teaching our offspring about money besides how to spend it? Luckily, there are easy ways by which you can show your kids how to save as well as spend money responsibly, and to help them appreciate its value.
Children as young as age three can grasp concepts like saving and spending. Get old school when they are little. Use a piggy bank and real money, then give them opportunities to save up for something they relish. The lesson learned is that you may have to wait to buy something you want. Compare this to the possible lessons we’re teaching kids when we always use our “plastic money card” or cater to their every desire. Likewise, adolescents can grasp the concept of compound interest—one of the most useful concepts in finance and the basis of everything from a personal savings plan to the long-term growth of the stock market. Use online tools, such as the compound interest calculator found at MoneyChimp.com, to show them how compounding works.
It’s also wise to help your college student prepare to maneuver through the financial world. Explain 401Ks, company matching, corporate profit sharing, and the value of a good benefits package. While these aren’t the only decision-making elements that go into job hunting, this information arms your children with the knowledge they need to make an informed decision.
You will also do your kids a favor by helping them create a budget. Add up their bills, debts, and expenses, then figure out exactly how much money they need to make to stay afloat. Also suggest ways to slash expenses so they can save more for retirement or that first home. Teach them how
to cook at home and brown bag it to work. Suggest “free” outdoor activities instead of things that cost money. Reduce content or eliminate cable TV and stop paying for any barely used streaming services. It all adds up, and if you show them how with a savings and compounded interest scenario, your words will suddenly have real meaning.
Teaching your children how to be “money wise” helps them save for retirement and more. And you can benefit, too, because it may mean fewer trips to the “parental money well” when they’re older.