Teaching your kids to save

A dollar saved is a dollar earned. “Oh, how boring,” you say. If you think so as an adult, can you imagine what goes through the minds of kids when they think about money? Well, I can tell you – whatever you put there. That’s right, children pick up their money cues from their parents. Later, their friends influence them and society at large. But you are the first line of defense to protect your child from becoming a financial failure. Granted children are not exactly blank slates ready for you to write the script of their life as you see fit. But take the time to show them how money is earned and spent. Many people feel that their money is their business and should not be discussed with children. This is so wrong.

You should teach your child the value of money and the hard work that goes into earning it. And by hard work, I don’t mean trying to beat the Drop Pan man. Take the time to incorporate money management into everyday activities. Financial author, Terry Savage, offers some ideas to help you give your children a good financial foundation.

1.

Treat your own money with respect and let your children share that respect.

If you bend down to pick up “red money”, your children learn that even small amounts are to be treasured. If you carefully consider the price of a purchase instead of just saying, “Charge it,” you instill a sense of value in those watchful eyes. If you count your change instead of stuffing it in your wallet, your children learn to be careful with their cash.

2.

Let your children make money decisions from an early age.

In many families, pocket money is merely a way of transferring enough cash to avoid daily handouts. But if you sit down and work out a budget for your child based on necessities such as school lunch money and bus fare, you can build in enough extra for some discretionary choices. Depending on the child’s age, a few extra dollars of pocket money can let the child learn the benefit of saving for a big purchase versus. spending on small stuff today.

3.

Give your child an attractive alternative to spending.

Many local banks offer accounts specifically aimed at children that let them add a few dollars at a time. Explain that the bank pays you “rent” to use the money — and that the interest builds up and earns more interest. In fact, if you start out with a $1000 deposit and let the child add to it, the picture becomes clearer.

4.

Make sure your child understands the connection between work and pay cheques and taxes.

While I don’t advocate sharing the entire family budget with your children, it’s never too early for them to watch you budget to sort out your spending and investing decisions. Let them know that the hours you work translate into the dollars you can spend. And be sure to give them some idea that the government takes about one-third of your earnings in taxes!

5.

When your child is at an appropriate age, encourage him or her to get some work experience.

It could be as simple as baby-sitting. Later on, it could be working in a restaurant. By the time your child receives a pay cheques, minus taxes, the concept of spendable income vs. savings will become very real.

6.

Make investments for children in stocks or mutual funds — and explain them to your children.

If young children are aware enough to be targeted for marketing by big consumer companies, they can certainly recognize and distinguish between brands. And if there are brands they use and like, by all means invest in a few shares of stock. Then they’ll get annual reports with pictures of the company’s products, and perhaps feel some pride of ownership.

Savage concludes by saying, “children’s attitudes about money are based on the things they learn and the genes they inherit. Many parents have noticed that two siblings raised in the same household have vastly different approaches to dealing with money. One child may hoard his or her pocket money, while the other is a spendthrift. So while you can’t completely mold a child’s perspective, you can educate a young person to respect money and the hard work it represents.”