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As we begin the new year, I not only am making my own set of resolutions, but I am also revisiting my goals for my child. One of those goals is to raise her to be financially responsible. And while school may prepare my daughter academically, the financial lessons she learns will come from how she sees me handling and saving money rather than from what I tell her to do.
The first step in raising financially responsible children is to assess your own money management skills. What are your financial goals? Do you pay your credit card bills in full each month? Do you save up for things you really want or do you just use your credit card and pay for them later? Do you have a spending plan, and do you know where your money goes each month?
Making changes in your own spending and savings behavior will not only help you as you talk to your children about money, but it will also improve your financial outlook.
Start saving money early
A kindergartener who saves just five dollars per week in an account paying 2 percent compounding interest will have $3,867 when he or she graduates from high school. Even preschoolers can learn the basics of saving. A piggy bank, a jar, or a coffee can is a great first savings plan, and kids can see the immediate result of their efforts as the level of coins rises in the bank.
As your children grow, it is important that their savings plans grow with them. Consider taping a picture of an item they are saving for on their savings jar. Each time they make a deposit into their bank, they will be reminded how their efforts will pay off.
Elementary school is a good time to open your child’s first real savings account. Some schools offer banking programs in connection with a local bank. After an account is established, children can make deposits at school or at a local branch office. If your children’s school does not have such a program, take them to the bank with you so they can make their own deposits and monitor their balances and progress toward goals.
Talk about money with your children
As adults, it is sometimes tough for us to distinguish between wants and needs, so you can imagine how difficult it must be for a nine-year old who is convinced he needs the latest video game. Spend some time talking about the difference between something you need to live and something you would like to have.
When you go to the grocery store, let your children help you shop by finding items and comparing prices between brands, looking for the best deals. Give them a small budget and allow them to shop. They will need to make choices based on their budget, which will help them learn how much they can afford to spend. Consider letting them keep what they don’t spend as an added incentive to shop wisely.
Let your children see you identify something you would like and then make a plan of how you will save up for it. Perhaps you will give up your morning coffee stop for the next month to pay for a new purse or lamp you’ve got your eye on. Your commitment to saving money will speak volumes to your children.
Giving children an allowance is a great way to help them learn how to handle money. Establish the amount and the schedule for when it will be paid, and talk with your children about the allowance and your expectations. Consider having your children set aside part of their allowance to be saved and let them spend the rest. You might even provide two banks or envelopes—one for saving and one for spending—so it is easy for your children to know the difference.
If your budget permits, you can encourage further saving by matching any of the spending money your children agree to save instead. If they save even a small portion of their allowance and you match it every week, their savings will grow quickly.
Help your child set and achieve goals
Once your child has identified something she would like to have, help her figure out how to get it. Do some comparison shopping online or with the weekly newspaper ads for the best price. She can create a written savings plan outlining how much the item costs, how much she will be able to save each week, and when she will likely have enough to make the purchase. If possible, provide opportunities for her to earn a little extra money to use toward reaching her goal. This is more than a great financial lesson. The sense of accomplishment that comes from setting and achieving goals is a feeling every kid should experience regularly.
Let your children make mistakes
You might be tempted to stop your children from spending his money in a way you might think is foolish or wasteful. Resist the temptation. Some of the best lessons your children will get will be from making mistakes. And lessons learned now will stick with them for a lifetime.
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Mechel Glass is the Director of Education for CredAbility. In this position, she is responsible for developing the curriculum and educational materials for online classes including webinars, podcasts, videos and listen-on-demand classes. She is responsible for managing the agency’s community outreach programs and staff, including financial education specialists in a 14-county area throughout metro Atlanta and north Georgia. She also manages the development and reporting of education partnerships online for the agency.
The information contained in this blog post is designed to generally educate and inform visitors to the Equifax Finance Blog. The blog posts do not give, and should not be assumed to provide, personalized tax, investment, real estate, legal, retirement, credit, personal financial, or other professional advice. Before making any financial decision, you should always consult with the appropriate professionals who can explain your options, rights, and legal responsibilities, and advise you on any tax, legal, credit, or business implications that may result from those decisions. The views and opinions expressed by the authors of blog posts are their own views and may not be the views or opinions of Equifax, Inc. and/or its affiliates.
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