Teach Your Children The Building Blocks Of Finance - Page 3 of 4

Teach Your Children The Building Blocks Of Finance

for gas, the lights, and food.

Saul discusses her finances with her daughter because it gives her a better sense of household expenses. When Saul receives her paycheck, she sits down with Savannah on a monthly basis and explains her income and the expenses she has to meet. “I would sit down with Savannah every month when I pay my bills and she would pull out her calculator and start adding things up. It becomes like a game to her but her thought process is moving.”

According to Kirkland, this is good for children to see. “This makes it real to the children — the specific dollars you have left in your account,” says Kirkland. “This instills an appreciation for what it takes to run a household.” Savannah sees exactly where her mother’s money is going.

Expose your children to investing. Many people can go online to monitor their 401(k) account, change the contribution they make, and their asset allocation. This is an excellent time to introduce children to this concept.

Kirkland suggests getting children to invest early and to invest in what they know or what they use. As an example of practicing DOFE principle No. 6: to be proactive and knowledgeable about investing, money management, and consumer issues, Kirkland suggests giving stock as a gift to children when they turn 12. “If it’s something that they wear, they want, they eat, something that they can relate to, buying stock in that company introduces them to the concept of ownership. You own a part of this company.”

While parents will have to open a custodial account for children under 18, the process of doing it together exposes young people to investing.

Ffriend suggests introducing children to other tax-deferred investment vehicles, such as a 529 Plan. “While control of the 529
Plan rests with the parents, the benefit is that it is tax-deferred,” he explains. “One of the things a child will learn early on is that wherever it is legitimate, they should defer taxes as much as possible, so they can have more income in the future.”

Hold family financial meetings. On a regular basis, parents should hold meetings where family finances are discussed. Go over spending habits with your children. Examine how they track their spending and what they spend money on. Let the kids explain why they are making certain purchases, and make the total family finances a discussion with input from everyone. Use the same principles, standards, and parliamentary procedures that a board of directors in any multimillion-dollar corporation might use. This is the meeting where you, as a family, map out long-term and short-term financial goals and develop strategies to accomplish those goals. This is also a good time to invite a professional financial planner to attend and let him or her offer individual professional help.

These are but a few of the tips to teach your children about money management. There are other everyday practices you can do, from reading the business or money section of the local newspaper with your children, to