Money beliefs and habits start extremely young. The sooner you instill good money habits in your children, the better they will handle money in the future. Foundations and principles you set early in your children’s lives will endure the test of time and outside influence. Always talk about money in a positive tone, never negative. Never say we cannot afford it, just say it’s not in the budget right now.
2. Create These Four Habits Early!
Teach the 10/10/10/70 concept… out of every dollar, children ‘Pay Themselves First! If children practice this concept early they are guarantee a bright financial future! 10 cents out of every dollar is set aside for savings, 10 cents is set aside for investing, then 10 cents for giving and your child is able to spend what is left over which is 70% or 70 cents. The 70 cents is used for all spending, even if the child is saving the 70 for future spending. Creating the habit of saving, investing, giving and spending wisely early, will become as natural as walking and talking!
3. The Smarter Way to Pay an Allowance, When? Why? & How Much!
Allowance can be used as a positive learning tool that shows children how to earn an income, finish a job to completion and become responsible. Allowance can create good habits, break bad habits and change behavior. Don’t think of allowance as “Paying Your Kids” think of allowance as a tool for teaching Financial Literacy and an introduction to the wonderful world of money. Children can start earning an allowance as soon as they know that money gets them what they want… this depends on the personality of your child, if at age two he wants anything and everything then its time for some money lessons. The amount you pay a child depends on the family income not age or ranking. Take what you are already spending and allow your child to earn that amount, and then… he uses his own money to buy the items you used to buy for him. I guarantee he will make better choices with his money verses your money. Allowance made simple!
4. Start a Savings & Investing Account Early.
Do this within the first year of a child’s life. Online accounts are best, because they pay a higher interest rate. My favorite is ING DIRECT’s Orange Savings account. Sharebuilder, which is also owned by ING DIRECT, is a wonderful for first time investors. Enlist family members to help you build and fund these accounts for the first five years. It’s proven kids do not remember what gifts they have received in the first five years. This will set a child on the road to wealth and create a MBA (massive bank account) by using the gift all children have, time + money = compound interest. Open an Account Today
5. Let Your Kids Make Money Mistakes
Mistakes are opportunities for learning. It’s best to make a mistake with a twenty-dollar toy versus a twenty thousand dollar car. Be money role models and learn along with your children. Rome was not built in a day and either are financial futures. One dollar at a time can grow into fortunes!