Dale Suezaki and Taylor Easley are financial advisers at Morgan Stanley, 329-7979.
Most of what children learn about managing money comes from their parents, and we all hope that our offspring will grow up to be financially responsible adults. Here are some ways you can teach your kids to save and instill a healthy dose of financial responsibility that they can carry with them to adulthood.
c Start early. Even very young children can learn to tell different coins apart. Give them each a bank and teach them to deposit their coins and watch their banks fill up.
c Make savings a habit. Encourage children to save a portion of their income, even if it’s only a small amount from a monthly allowance, earnings from a lemonade stand or a part-time job later on.
c Give regular allowances. Allowances give kids the chance to manage cash “hands-on,” a chance to practice how to save regularly and plan their spending. Of course, the amount should fit the child and be determined by you.
c Open an account in your child’s name. Savings can show youngsters how their money can earn more money through compound interest. They will also see that their funds are in a safe place, recorded and available when they need it. Regular deposits, however small, will help them feel comfortable handling their own accounts. Referring to their statements reminds them that their savings are there and growing.
c Help plan a budget. Have your kids practice writing down what they’ll buy during the week and how much each item costs. Then, suggest that they compare the list to their weekly income. If it doesn’t add up, they’ll have to prioritize their immediate needs and wants.
c Encourage goal setting. Help your kids acquire the savings habit by helping them make a “wish list” and a schedule for saving with a target date for acquiring the wished-for items.
c Encourage money-earning ventures. Suggest that older children find creative ways to earn money beyond their weekly allowances — doing special chores or seeking jobs around the neighborhood, such as raking leaves, running errands or pet sitting.
c Issue an IOU if you extend credit to your children and set a repayment schedule. You may want to charge interest at a nominal rate to demonstrate the cost of borrowing.
c Show the effects of inflation. To demonstrate how prices have gone up over the years, sometime when you’re at the library with your children look up past ads in the newspaper archives for movie tickets, bikes, sneakers and other favorite spending goals. Then discuss what things cost when you were a child and even when your children were younger.
c Acquaint them with stocks. Make a game of teaching kids about stocks and how they work. Have everyone in the family pick a favorite company and “invest” $100. Show them how to keep track of the stock’s daily progress through the newspaper’s financial section. Explain that stocks represent ownership in a company. Then describe how the price of a stock generally follows the company’s progress and how — as the company’s fortunes rise — so potentially does its stock.
c Encourage financial reading. As your children grow older, provide financial magazines and discuss investment choices. Invite them to meet your financial adviser and to attend investment seminars with you.
Fiscal responsibility won’t happen overnight. If you begin early, however, by the time your children are ready to start their own investments, the ground work will be in place for them potentially to become savvy investors.
This article is published for general informational purposes and is not an offer or solicitation to sell or buy any securities or commodities.
Dale Suezaki and Taylor Easley are financial advisers at Morgan Stanley, 329-7979.