Starting Kids Out on the Right Financial Track

June 18th, 2010 | Banking, Money, Personal Finance, children

Many of the best lessons we can learn about personal finance are taught when we are very young. By laying a strong financial foundation for your children, you can help shield them from making catastrophic financial decisions in the future. There are some great options available out there that can help any child learn more about money, how to handle it and how to respect it.

There is a lot to be said for a paper route, or even earning money for doing chores. Instead of handing out an allowance as an obligation, teach your kids to respect that money by having them work for it. We’re not saying put your three year old to work scrubbing floors, but once your kids are around the age of 9 or 10, they should be able to start grasping the concept of work = money.

This can have a pleasant side effect of reducing spoiling, and will help your children realize that hard work does pay off. Introduce the concept of bonuses early on and they will be able to stay motivated and keep on track. But you can just stop here. Now that your kids have money, they need to know what to do with it.

The best solution is to open up a kid-friendly checking account. Most banks now offer options for children’s accounts and this can instill a brand new sense of responsibility. Open an account with your child and make sure they understand the basic principle of not spending what you don’t have.

They may need to learn this the hard way, but over time, this first checking account will open up many new horizons for them. Stay on top of what they are spending and offer advice when necessary. The next step is to introduce the concept of budgeting. Now that they have money, and a place to put it, they will need to decide how they want to spend it.

This is a great opportunity to teach children about what to buy and how to determine whether or not a purchase is really worth the effort that went into earning that money. Grab a notebook and have your child draw up a wish list of what they would like to buy with that money. Once they’re done, you can go over the list and help them figure out what it will take to earn each item. Chances are, once they consider how many hours it takes to earn a pair of jeans, they’ll start gaining more respect for money and work.

Last but not least, it is vital to teach children how to grow their money. Open up an interest bearing savings account in your own name, and deposit their savings fund into it. Describe how the process works and keep them updated on how much interest they are earning. Again, this is a powerful motivator and can help a child learn more about how to make money when they are adults. All the work that you put in now will have a big impact on their future.

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Originally posted 2008-09-22 05:33:26. Republished by Blog Post Promoter

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