When teaching children the importance of financial fitness, know that they’re far more interested flashy toys they see at the store. They don’t take into account the financial consequence associated with purchasing them. As parents, we’re in a precarious position. We want to teach our children the difference between a “want” and a “need,” and help them learn the meaning behind the price of the toy.
Key to the process is both discipline and communication. Now, I’m not a parenting expert, but teaching our children about money matters at an early age can go a long way to successful saving techniques as they grow and begin earning money themselves.
Educating, motivating and empowering children to become regular savers and investors, will pay dividends when they are out on their own, making their own financial decisions.
Practice goal-setting with your child. Teach him or her to set financial boundaries. A desired toy can be used in a goal-setting exercise. By performing chores around the house , money can be earned to buy the toy. Goal-setting helps a child learn to accept responsibility. After doing chores and earning some money, a child realizes how much work went into getting the toy and will appreciate it more.
Communicating with the child about the basics of saving is also key. Explain how to make savings grow and how to spend wisely. Kids hear everything, including parents talking about saving and spending money wisely. These messages stick with them through their formative years.
One simple way to help a child learn to save is paying an allowance in denominations. If a $5 allowance is due, give it to your child in five $1 bills, and encourage him or her to put $1 aside for savings. Explain that even saving $5 a week at 6 percent interest compounded quarterly would total about $266 a year, $1,503 in five years and $3,527 after 10 years. This can illustrate how a little saving now can grow money significantly over time.
National Teach Children to Save Day is in April, and Rabobank and other financial institutions will be out at local schools helping to re-enforce some of these money-saving lessons. Also remember that it’s never too early to open a savings account for your child. Signing up for a Minor Savings Account lets kids record their deposits and withdrawals and keep track of how their money is growing along with them.
Michael Drapeau is Rabobank, N.A. Vice President and Branch Manager in Murrieta. Rabobank, N.A. has nearly 120 retail branches in California, including Murrieta. Rabobank, N.A. is an Equal Housing Lender. www.rabobankamerica.com