Parents, everything your children learn about personal finance (not to mention everything else) will come from your examples. Your kids will accept paying early or paying late, having enough or not having enough, being in debt or being debt free as the way life is.
If that isn’t powerful incentive to be on your best financial behavior, I don’t know what is. For those who need good ideas and help to improve personal finance habits, you can start by searching the archives here at Real World Finance. I also encourage you to broaden your search to other online sources that may deal more specifically with your circumstances.
Regardless of your financial picture, there is something you can do to help your children establish good savings habits. And you can start today.
Work
The first thing is to set up a weekly allowance. You will agree to pay your child a reasonable sum every payday in exchange for work done around the house. This needs to be real work with real value—something that will contribute to the family and make your life a little easier. If your child learns new skills in the process, so much the better.
Just like a real job, there should be a job description spelling out what is expected. As an employer, you can’t ask for more work without compensation. As an employee, your child cannot expect payment for doing any less than the agreed-upon tasks. This is a great introduction to the world of work, and helps kids learn responsibility and time management. It’s great for self esteem, too.
Savings
Next comes the savings lesson. At your bank, open a savings account just for your child. The understanding is that any money your child wants to save will go in the account. And for every dollar going in, you will make a contribution (something like a retirement plan at work).
Make it worthwhile. Some parents match dollar-for-dollar. Some kick in 50¢ for every kid dollar. Others do a smaller percentage for a modest contribution, and increase it as the contribution grows.
Benefits
There are so many benefits to this approach. Your child can (and should, really) go into the bank with you to make each deposit. Seeing the increasing balance is a great thing for kids.
Also, you can help your child establish a goal for the money in savings. Will it be used for an expensive item? Will some of the savings be earmarked for a purchase, while the rest stays put, growing and gathering interest?
Have fun with this. Start with the basic idea and tailor it to your life situation and the personality of your child. However you do it, your child is about to move at least one step ahead.
