Among the many responsibilities of adulthood, managing personal finances is one of the most important skills you can learn. Unfortunately, many of us have had to learn this lesson the hard way, without any formal education on the subject. Sarah J. Halpin CERTIFIED FINANCIAL PLANNER™ and Associate Vice President with The Danforth Group of Wells Fargo Advisors has some tips to help you give your kids a head start.
Introduce kids to dollars and cents at an early age. Teach your kids how to count change, and help them understand the value of each coin. Explain how to pay for things. For example, if they find a toy at the store that costs $2.75, show how they would need two $1 bills plus three quarters to pay for this purchase. You can even let them make the exchange at the check-out counter.
Explain the concept of earning money. It's important for your children to understand how you earn money when you go to work, and also how that money pays for housing, food and the many fun activities your family enjoys. Explain to them the benefits of having a job, and help them appreciate the reason you leave the house each morning. Tie their allowance to weekly chores done around the house, to help them learn the concept of earning their money. It may also be a good idea to pay their allowance in small increments, such as five $1 bills instead of one $5 bill. Dividing their money in this way can help them see how they can use a portion of the money to spend on things they want, and also how to save a portion of their earnings as well.
Respect money. To set a good example for your children, don't discard pennies or small change. Show them how saving even small amounts of change in a jar can add up to a significant sum. Count it out together every few months, and help them pick out something useful they can spend it on. Most importantly lead by example and help teach your kids how to save money, and also how to spend it wisely.
Set savings goals and match their savings. If your child wants to purchase a video game or a new item of clothing, work with them to figure out ways to save for this goal. If the item costs $20, help them estimate how long it will take to save that amount and encourage your child to find ways to make some extra money by picking up additional chores around the house. One way to encourage good habits is by matching a portion of your child's savings. For example, you could contribute an extra 50 cents for each dollar they put away. Giving them extra incentive can increase their savings more rapidly and help teach them good habits at the same time.
Source: Tips for Teaching Your Kids about Money CAR 0512-0241
The information provided is general in nature and may not apply to your personal investment situation. Wells Fargo Advisors, LLC, Member SIPC, is a registered broker-dealer and a separate non-bank affiliate of Wells Fargo & Company.Neither Wells Fargo Advisors nor its financial professionals are legal or tax advisors