I had an “Aha!” moment recently.
Grandpa had given my 2-year-old daughter a $1 bill. Her eyes lit right up. She pulled out her little blue flowered wallet, which had previously been used as a toy purse that goes with her on “shopping trips,” and she tucked it inside.
I asked her, “Wow! What are you going to do with your dollar?” She thought for a moment and said, “Save it! I’m gonna save it!” The investment advisor in me beamed with pride.
Then she quickly changed her tune, much to my chagrin, and shouted as only 2-year-olds can, “No…um…I buy gummy bears with my dollar!!!”
The scenario got me thinking. Of course, buying gummy bears is a lot more fun than saving money in a wallet. But, how do I want my daughter to learn about money? How will she behave with money? How will she save it, spend it, donate it, or invest it?
Everyone has moments that define their thinking and feelings about money. It starts when we’re young. I remember my mom took me down to the local bank when I was 8 years old and helped set up a savings account. The banker gave me a little yellow register to write down the transactions; keeping track of my 50-cent allowance and the birthday cash that would come in the mail. It was really something!
Teaching our children and even our grandchildren early on about money, and how to be moneywise, is one of the best gifts that we can give to them. Here are a few ideas to help teach your kids about money:
Saving: Help your kids set up their own bank account that you oversee. Show them the account online, so they can see a real live register of the activities that they do. Consider matching their savings as a little preview of what 401(k) matching is like, and it also instills the principle of delayed gratification. Older kids will enjoy seeing their name associated with real money. As they get prepared for college or whatever they intend to do, those extra funds can help pay for much needed books or Ramen noodles.
Spending: Encourage your kids to set a budget for short-, mid-, and long-term goals: a small toy at the store, a bigger purchase like a bicycle (you can always offer to match their funds) or buying small presents for family during the holidays. Budgeting is an important skill in just about every phase in life.
Giving: Show them early on what it means to be charitable. As part of their budget, have a set amount to donate to a special cause. Perhaps take some time on an evening or weekend to do a volunteer activity like cleaning up a park or working at a soup kitchen. Show them first-hand how giving of their time and means makes a difference in helping others. Grandparents can use this as an opportunity to teach their grandchildren about causes that are important to them and to get some one-on-one time.
Investing: An excellent way to start investing young is through a Roth IRA. If your child or grandchild has earned income, you can set up a Roth IRA for them. Help them learn about investing in stocks and bonds through mutual funds and exchange-traded funds, enforcing important concepts like the power of compounding and diversification. Your Foster & Motley advisor can help you talk to them about these topics.
Empower them: Give your kids a way to earn some money. Set an allowance for helping with chores around the house. This teaches your children how they can work to meet financial goals. At the very least, having a cleaner house doesn’t hurt! Or, help them become mini entrepreneurs. Remember your first lemonade stand or paper route?
I’m sure we can all think of one story that has shaped our view on money from our childhood. What do you want your child’s or grandchild’s story to be?
Reach out to your advisor at Foster & Motley for more tips in teaching your kids how to use money in a positive and healthy way.