Financially Fit & Fabulous: Building Wealth – What to teach your children about savings and investment
TEACHING your children the basics about money management is a good means of building generational wealth. Those who have researched the issue indicate that it is never too early to start telling children about how to grow and preserve wealth.
Opportunity
As a parent you will get many opportunities to teach your child that there is a cost attached to the toys and new clothing they desire.
As children become older, it is recommended that they add piggy banks in order to teach them the concepts of saving, spending and sharing. Shopping trips can also be a good time to tell a story about where money came from and how it should be carefully spent.
Storytelling
Using parables or stories is one great way of getting across concepts about saving, investment and even giving. Stories are used to teach children values, and they also can be used to teach them the value of not wasting money and other resources available to them. Even budgeting, which is a concept best taught early, can be introduced through storytelling.
Money does not grow on trees
When your child asks for something expensive, resist the temptation to just buy it off your credit card and pay for it in silence. Instead, invite your child to save towards the much desired gadget which might be a new toy or telephone or even a “brand name“ shoe.
Ask them what chores they think they can do in order to earn the money to buy it. They will be learning two lessons at once: the value of work and the value of saving.
Encourage them also to do chores for older neighbours who are willing to pay for their assistance, such as mowing lawns. They will learn a third and fourth value: caring for the environment and helping those in need.
How money can grow
You will need to teach your teenager the difference between saving and investing. There are many online sources that simplify investing information for teenagers. Find them and sit with them throughout.
You should also teach them about how money grows through compounding.
By placing their money in accounts with the best interest rates, they can see their money grow. Make a game of it and show them how coins can increase in value and become dollars and even thousands of dollars.
Teach your children to save with regularity, because this is the best ingredient in growing their savings. When they get special monetary gifts from relatives, take them to open a savings and investment account. Ask your advisor to have a talk with them as well, as they begin this new journey.
Something to look forward to
Saving and investing is not an end in itself, your child will appreciate the journey even more, if they are allowed to enjoy the destination. So make sure they achieve their aim and enjoy the benefit of their savings goal. This will encourage them to continue saving towards other much desired goals. As
they get older help them to visualise bigger goals to save and invest towards, including buying their first car and their own home.
Follow me: Lead by example
The final lesson that you will teach your child is the most powerful because it is leading by example. If you advise your child to save regularly and make a budget and yet you are doing no such thing, they will follow what you do and not what you say.
Share your monthly budget with them and , as they get older, your investment plans as well. Teach them to help you track how well you are doing in sticking to your budgeting and investing plans. If you believe you do not have the knowledge to help your child on this journey, ask your financial advisor for help and guidance, along with researching online sources of information that can help you along the way.
Speak with your Scotia Investments advisor about opening an investment portfolio to grow wealth for you or your child.
Latoya Virgo is a licensed Investment Advisor from Scotia Investments Jamaica Limited.
