Monday, February 23, 2015
5 Tips on How to Teach Your Child about Finance and Financial Responsibility
Teaching your children about finance and how to invest responsibly is much like teaching a man to fish. It can help them provide for themselves starting at an early age, and it can continue to pay off well after their retirement.
The problem is that teaching finance and the skills needed for it is a typically difficult, but it's even more of a challenge when children at involved.
Below are some tips that can help you teach them the value of a dollar and how to use it wisely.
1. No More Allowances
The first thing you need to do is to wean your child off an allowance if they're already on one. Money does not fall from the sky like manna from heaven.
The worst part is that an allowance can actually make your child less responsible with how they spend. They need only wait to receive more free money.
2. Institute Ways to Earn
The second step is to formulate ways for your child to earn more money through work. Things like chores, mowing the lawn, trimming the bushes and so on can give your child the basic work ethics and skills they need for finance.
You can then reinforce these values by working with your neighbors to help your child work for his or her money.
3. Introduce Finance Through Savings
Savings accounts are simple investment vehicles. While they do not earn a large amount of money, they can teach your child to accumulate wealth through simply holding on to his or her money.
4. Look at Penny Stocks
Penny stocks are another way for your children to interact directly with finances, but they require close supervision. The last thing you want is for your child to lose their hard-earn funds without experiencing some returns.
If you're inexperienced with penny stocks, then enrolling in an investment simulation that uses data from the real stock markets may be a good idea for both you and your child. It's far easier to learn through doing than by listening.
5. Don't Make Your Child Pay for Necessities
The most important thing to remember is that your child isn't an adult. They shouldn't have to pay for necessities like school supplies, basic clothes or lodging yet. Forcing them to do so tends to be counterproductive to teaching finances.
Finance and Your Child
The road to teaching your child the values he or she needs to become proficient in finances is a long one, but it doesn't have to be an uphill challenge. The above tips will help you teach your child how to become financially responsible, how to value hard work, and how to recognize when an investment is a good idea.
Gennady Barsky is the CFO of JetSmarter and Real Estate Mogul. Barsky is a lover of all things automobile and has a passion for Social Media.