In today’s world of finances and investments there is no reason why our children need to continue to be clueless about one of life’s most important skills. Due to high levels of debt, lack of savings, the inability to budget all symptoms of an education system that has failed to educate and inform our youth about these important life long skills. If they are not taught adequately in our schools then its up to the parents to teach these skills to our children.
These skills have always been important to learn, however, in the rapid changing fast paced world we live in today it’s more important than ever before. The high cost of living, many families with two parents working, some parents working two jobs, high taxes, complicated regulations, a variety of financial product choices, and lack of financial literacy makes it difficult for many to cope and keep up with all this activity and still live your life.
Actually too many Americans just never developed the money management skills necessary to deal with our complicated and very expensive world. However, if you have children, we can teach our youth some money smart lessons. Even we adults can use this opportunity to give ourselves a refresher course.
Therefore, some suggestions for a financial curriculum for our children. This article is intended to be food for thought that can be applied, improved upon, and revised. First and foremost you the parent make the final decision and set the example for your own children.
However, these basic steps should help us begin drafting a roadmap to educate and inform our children about the importance of finances and investing.
Goal Saving. In our highly commercial and fast paced culture, at some point your children will become interested or at least inquisitive about money. Obviously, it’s important to teach them they can’t have everything, and they certainly cannot have everything right now. So once they are old enough to receive an allowance or to earn money in some way, we need to encourage them to set a goal for something they want, such as a bicycle, a toy or video game, and to put money aside every week for this particular goal. It’s also a good idea to model this behavior yourself. So if you are considering making a major purchase such as new furniture, show your children how you are setting aside money regularly for this purpose, rather than borrowing as much as you can or putting the entire purchase on a credit card.
Create a budget. In can be a challenge to establish a household budget and possibly even more difficult to stick with it, however, for most people, it’s a worthwhile endeavor. You will be teaching your children a valuable lesson showing them how you have a certain amount of income and where the money goes each month. This could be your mortgage, utilities, groceries, insurance, retirement accounts, etc. Explain to them that staying within your budget is important, it will help avoid problems such as debt and extra late fees tacked onto bills including high credit card interest rates. It may be wise to point out as your income rises, you can gain greater flexibility in budgeting. Here’s the key factor, teach them to live within their means will pay off in the long term.
Make investing fun. Even young children enjoy learning about the investment process, especially if you explain to them they can own or be employed by a company someday that makes a product or service they like. You might want to select such a company, and together chart its course over time. You could give your child a pretend $100 bill to “invest” in this company and follow how its value changes, while you can explain the various factors that can influence its return on the original investment made. At some point maybe in their teenage years you could purchase stocks for your child and place them in a custodial account. You also may want to share how your own investments are performing. The investment world can be appealing making it a good learning experience. By sharing your enthusiasm for investing you can encourage good investment habits throughout their lives.
Remember knowledge is power and the more knowledge and information about finances and money management that we can teach to our children now, the more empowered they will become to make smarter and more informed financial decisions in the future.