Teach Your Children the Value of Money

Teach Your Children the Value of Money

There are a number of ways you can teach your children to form healthy savings habits. This article offers some age-specific teaching tools.


Your Child Could Become a Millionaire

This chart shows the growth, compounded at 8% monthly, of an investment of $100 per month beginning at age 4 and ending at age 18, assuming that the investment remains untouched until age 62. This example is hypothetical and does not represent the performance of any actual investment.

Summary

• The benefits of teaching your children about money can be both short and long term. Let your children help you determine how to teach them. Use their questions to develop lessons.


• Explain to children that money is earned. Consider paying them for helping with certain chores.


• Use a piggy bank to help teach about savings and interest. Set a savings goal to encourage your children to save some of their allowance. Calculate how much is saved each month and chip in a certain percentage as interest.


• Take your children to the bank to open a savings account requiring a lower minimum deposit.


• If you extend credit, issue an IOU, set a repayment schedule, and charge interest.


• Review compounding, or the ability of interest to build upon itself.


• Once your children begin earning their own money through part-time jobs, introduce them to investments such as stocks and mutual funds.

Checklist

• If they're old enough, help your children set up a plan to save for their own goals (such as a new video game) and other accounts for family goals (such as paying for college).


• Agree on an amount of their savings that you'll "match."


• Schedule time to talk about how investing works and how it may enable people to reach their financial goals faster.


• Talk to your children about good shopping habits. Perhaps you can ask them to clip coupons and let them keep some of the savings.

Source: Teaching Your Children the Value of Money

Topics
Teach Your Children the Value of Money
Earlier Is Better
Where Does Money Come From?
Children and Allowances
Make Saving Interesting
Banking and Investing
Compounding
A Little Learning Can Pay Off