Photo By Airman William Tracy | Katie Ford, 6, smiles with her “spending” piggy bank during the Airman and Family...... read more read more
As parents, we often agonize over what type of gift we want to get for our children during the holidays or when their birthday is fast approaching.
One of the best gifts that a parent can give their child, however, is the ability to save and manage money smartly.
I often bring this up when I'm speaking with groups of people or even counseling clients on a “one-on-one” basis because it generally sparks a lot of interest and generates good conversation. Since April is the “Month of the Military Child,” there's no better time than now to share some thoughts on the topic.
Certainly, some parents might disagree with me and say the best gift you can give a child is a happy, healthy home with a foundation built on unconditional love. I couldn’t agree more!
Children raised in a happy and healthy home, stabilized by unconditional love, will most likely succeed in dealing with any of the complexities that life, in general, will throw at them.
However, even some of the most grounded and stable people have not always made the best financial decisions.
It must be understood that poor money management decisions are not the result of poor parenting, sub-level intelligence or a lack of scholastic accomplishment. Poor money management decisions are often made because people simply do not know how to manage money and never have had the opportunity to learn. A lot of our own parents were never exposed to proper money management skills or techniques for saving and investing.
Back in the time that I attended school, there were no courses offered on basic personal finance or money management. Some school systems are now offering basic personal finance classes to junior high and high school aged children, but is that enough?
I have heard a variety of things some parents do to teach their youngsters about earning and saving money. One of the best tools parents can use to teach their children money management is providing a monthly allowance. I believe an allowance should be provided as a tool for children to learn money management, not as a means to get children to perform household tasks. Children can learn to contribute to the household without expectation of monetary reward. That makes an allowance a focused means to teach children money management.
Here are six suggestions to encourage children manage their money and get them on the road to financial freedom:
Match your children’s savings dollar for dollar, quarter for dollar or whatever comfortably fits your budget. Who doesn’t like free money? It may be a small cost to you, but the saving habits you are instilling now will be a great return on your investment later on in your life and your child’s.
Give your kids interest on their savings. You can customize the interest rate so that their account can grow at a faster rate. This is another example of free money and over time, will introduce your child to the power of compound interest.
A good way to help children understand compound interest is by allowing them to “see” their money grow visually. Over time, even small amounts of money can grow at a fast rate. Demonstrate compound interest using a chart or spread sheet. For something a little more “kid friendly,” you can use kids “online” savings program such as www.smartypig.com or www.feedthepig.org. Your bank or credit union might offer financial literacy programs for children, too.
Put your child in charge of buying their own “stuff.” This can be done with allowance and is for things like candy, video games, trading cards, cell phone applications, etc. It might surprise you how frugal your child will become when it’s their money being spent and not yours. In addition to helping children learn how to determine “needs versus wants,” the added benefit is that it will save you money in the long run.
Have your kids establish and record financial goals. Make sure the goals are easily attainable in a relatively short period of time. This increases the chance they'll want to establish more goals in the future and you can then increase the time and the amount they need to save for those goals (“a bite at a time” I say). These goal-setting skills will help them later on when they are ready to start saving for a car or home.
Help your kids open a savings account at your bank or credit union. Kids love to act “grown-up” and tapping into this opportunity may be the spark that ignites their life-long savings habit. Additionally, when their money is in a savings account, it is not as easily accessible. Encourage your child to categorize their savings into three groups: saving and investing, charity/church/community, and spending. Suggest to them depositing at least 10 percent of any money they receive for allowance, gifts, earning, etc., into their savings. Another 10 percent can go to the charity/church/community category. The remainder can be set aside for future spending based on your child’s financial goals.
Remember, children constantly look to their parents for guidance and direction. If you model good saving behaviors, money management skills and savvy consumer habits, chances are good your kids will do the same. Best of luck to all of you parents raising our next generation of millionaires!
If you would like additional financial information or financial counseling at NSA Bethesda, please contact the FFSC Personal Financial Management Team Financial Counselors: Lee Acker, Brian Pampuro or Kristy Halderman at 301-319-4087.
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This article was contributed to The Journal at NSA Bethesda by Brian Pampuro.
| Date Taken: | 04.04.2018 |
| Date Posted: | 04.04.2018 13:51 |
| Story ID: | 271746 |
| Location: | BETHESDA, MARYLAND, US |
| Web Views: | 61 |
| Downloads: | 0 |
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