Somewhere in-between fairy tales and monster movies, play dates and school days, it’s important to find time to talk with your kids about money. Financial stability and fiscal responsibility don’t just happen – they’re habits formed early on when children are presented with financial know-how that they can easily understand and apply later in life. Helping children form healthy financial habits can start at a very young age — if you know not only what to say but also how to say it.
Fundamental money lessons can help put your children on a path to financial stability that will last a lifetime.
Taxing As Teaching
From the moment we receive our first paycheck, we learn that taxes are a fact of life — and of earning. It’s important that children learn from a young age that they don’t get to keep all that they earn, which will help prepare them for the taxation they will encounter most of their working lives. Consider putting aside one-third of a child’s ‘earnings’ as a tax and place the money in a savings or investment account for use when the child is ready to make a large future purchase such as a car or college tuition.
Earnings or money received as a gift needn’t be tucked away, never to be touched. When children use money as a means of purchasing something they want — candy, toys, games — they develop a positive relationship with money and begin to comprehend that the things they value and desire have a cost.
Children tend to live in the moment so the concept of saving may require a bit more explaining and a little more patience. Help your kids set aside money for an item that, to them, is a must-have, like a bicycle or electronic device. You’ll be putting them on the path to developing self-discipline and attaining long-term goals.
Teaching children that they have a responsibility to give back never backfires: they’ll come to appreciate that the greatest joy in spending lies in sharing with others and not in simply focusing on one’s own desires and needs. Parents should talk with their kids about setting aside a portion of every dollar they receive for a philanthropic cause that’s of the child’s choosing such as a friend in need, a church, a charity, or a cause.
With just a little bit of financial knowledge your children can start on a path to financial security that, like the fairy tales they once loved, can have a happy ending.