Wednesday, October 21, 2009

Teaching finances to your children

Start early and instill good habits. Easier said than done, however, it is possible to make sure your kids don’t make the same mistakes as you have. Over use of credit cards, second mortgage on the home to pay off those credits cards and making only minimum payments on your bills. You know who you are.

Start with simple tasks at first.

  1. Introduce them to money. Just let them look at money and coins. Use them as counting tools 5 pennies equal a nickel, 4 quarters equal a dollar.
  2. Communicate the value of money and how work lead to getting paid, that money is used to buy things and that become money to pay to those employees or owners.
  3. Communicate the differences between needs, wants and wishes.
  4. Have your child set goals to learn the value of money, like a goal to by a new baseball mitt for the spring.
  5. Value of saving rule of 70. Divide the interest rate into 70 and that gives you the time it takes to double your investment. If you have a 5% rate of interest it takes (70/5) or 14 years to double your original investment.
  6. Encourage savings from allowance for $5 earned save $1.
  7. Take your child to open their savings account. Let them open the monthly statements to see the interest they have earned.
  8. Have your child put the receipts for their spending into an envelope so they can see what they have spent their allowance on.
  9. Teach your child about ads on TV, radio and newspapers and their meaning. That they want to tell you about their products to have you buy them.
  10. Credit cards. Let them look at your cards, the bills and that they are not free.
There are some good books out there that can help your kids, and any age, to find a job to learn to make money. It might be a lemonade stand or make gift baskets, replace home/office filters and take in trash cans for senior citizens. I have read and recommend “Young Bucks” by Troy Dunn available on Amazon. It give strategies for your kids and a lot of job suggestions and all the start up info you would need to execute to business.

Good luck.