Is it ever too early to start teaching your kids about money management and personal finance? You don't want kids to start obsessing about money at such an early age, but there is something to be said about starting some key lessons on budgeting and investing. A recent article asked the question of when it was appropriate to sign a student up for a checking account. That is an excellent question, and here is how I am teaching my kids about finances.
Getting started early
Like many parents, I give my kids allowance. They earn this allowance by doing chores around the house, and we review their balances from time to time. Each of them has a money market account which functions like a savings account. If they want to make a purchase, we talk about saving and how long it took them to save up for that item. It is also a good time to have that predictable conversation about saving for college and retirement. At around age 10, each of my children have selected a stock and together we purchased a few shares so that they could have something to track.
I could see the value of having them record their transactions in an old-school checkbook, but nowadays it makes sense to embrace technological tools. Therefore, we track their savings accounts on a tablet, and use one of the many financial management apps that are on the market today. This is a good way for them to see how their money builds up, and how quickly it can disappear if they spend.
It is also important to think about other people when it comes to money. Therefore, we have instilled habits of giving in our children. They pick their favorite charitable organizations, and they make regular donations out of their savings. Perhaps this isn't very capitalistic, but I want my kids to understand that money cannot buy happiness. In addition, I want them to understand that they can always help other people.
Some key tips
If I were to offer some tips to parents that want to teach money management skills, I would suggest this:
1. Don't be afraid of starting too young. If anything, start a saving mindset. Saving is something that many adults struggle with on a regular basis. If you can get kids to start saving habits, they may do a lot better when they are older.
2. Adapt to your kids. Perhaps a bankbook is a good way to go instead of technology. There is something valuable in recording transactions in a book or keeping a paper log. This teaches discipline, and it also teaches kids that not everything is about technology.
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