4 fiscal lessons you need to
teach your kids |
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Share the secrets of saving
"The major thing we can teach our children is saving," says Geoff Wilson, vice president of volunteer initiatives for the nonprofit financial literacy organization, Junior Achievement Worldwide.
Personal savings are the key to college, retirement, homeownership and anything else in your financial future. Personal savings rates in the United States, however, have declined significantly in the past 20 years, according to data collected by the Federal Reserve System.
Godfrey chalks at least part of the savings problem up to a lack of awareness. "The only thing kids see us do with money is spend it," she says. "They don't see us save, they don't see us give to charity, they don't see us pay bills, so it's essential to involve them in the rest of the process."
One way to do that, Wilson says, is to show them your
own savings vehicles and explain how money grows when it's invested.
To bring those figures into perspective, have your child pick out
an item he or she wants, such as a toy, day trip or amusement park
pass, and discuss how much of his allowance he'll have to invest
and over what time period to be able to afford it.
For older children, use that same process to calculate
how much the family will need to save for a college education. Bankrate's
savings
goal calculator can help you demonstrate.
"Kids love to see their money grow," says
Wilson. As an example, if a 15-year-old began investing a dollar
a day until she reaches age 65, she will have amassed
over a half-million dollars, assuming a 10 percent average annual
interest rate.
Instill smart spending habits
After learning to pay themselves via savings, kids need to learn how to pay others.
Fitzgibbon says that the easiest way to drive spending and budgeting lessons home is to let children earn some cash, then guide them in their purchasing decisions. "Handing kids an allowance and then not helping them decide where that money should go isn't cutting it," Fitzgibbon says. "Parents need to show why they make the purchasing decisions they do."
Perhaps the reason most parents don't discuss their
spending choices with their children is because they're not making
the right ones themselves. A survey by the AllianceBernstein investment
firm found that more than half of all parents spent more on dining
out in the past year than they did on saving for college; 49 percent
blew more dough on vacations.
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