I once heard it said that in Japan, when a child is born, an account is started for that child’s grandchild. This is a stark contrast to what we do in America. Our national savings rate is only 6.4 percent and many Americans are living paycheck to paycheck, buying on credit and robbing Peter to pay Paul.
Last night as part of the Millionaire Journey show, Lisa Maria Carroll and myself discussed how parents can create and leave financial legacies for their children. As many parents prepare to send their children back to school in the next few weeks, this is a great time to begin to talk to your kids about finances or to begin to prepare them for financial literacy. You don’t have to be a genius to teach your children about finances nor do your children need to be teens in order to understand money. You can begin teaching your kids about money as early as preschool. This includes everything from teaching them the value of different currencies, to taking them to the grocery store with you to compare.
The truth is by the time your child leaves your home at 18, many experts believe they should know the following money skills:
Here are some things you can do to begin to teach your kids about finances:
• Learn how to budget
• Make and deal with spending decisions
• Understand rewards of work
• Delay gratification
1. Start early. You can begin teaching your kids about money as early as preschool. This includes everything from teaching them the value of different currencies to helping them understand people have jobs that pay them money.
2. Budgeting. Include kids in on your budgeting decision. Everything is a teachable moment about budgeting. With school starting back this is a great opportunity to help them create a budget for back to school clothes or extracurricular activities. Include field trips in the cost of your budget as well. It’s also a great opportunity to help them understand their money (or at least yours) will go farther if they take their lunch.
3. Teach them to shop. Most parents spend their time teaching their children how to save money. But ask yourself, have you taught yourself to shop? If you have the time, take your children to different stores such as Neimans, Macy’s and even a second hand store to give them an understanding of how to stretch their dollars while getting a good quality product.
4. Everyday moments. Recognize that everyday brings opportunities to teach your kids about finances. Whether it’s taking them along to with you to the bank, the grocery store so they can learn comparison shopping to tipping at restaurants or explaining why you chose one gas station over the other (if price related even if they sit opposite each other. Also consider playing board games with them such as Monopoly that starts them thinking about finance and property ownership.
To Hear the entire show, click HERE
Here are two good books I recommend parents read on raising financially savvy children.