Teaching Your Child About Money

When your child is very young a simple, 'piggy bank' or coin saving bank is great to get them started saving. The contents of that same bank can be used for coin identification and coin value teaching. When the coin bank fills up bring them and their coin bank to the bricks and mortar bank in town to deposit it and start, or add to a savings account. Allow them to choose a goal that they want to save towards. It can be the latest electronic toy, a new bike or a college education. It is important for them to choose their goals, this is their motivator, it is a lesson in patience and saving. Do not add this money to their college account if you have started one for them. They can choose to add it to their college fund later if they are so inclined. They should have full reign over this account so that if they decide to use the money for something frivolous they should than be stuck with the empty bank account. This is an important part of the lesson.

Give your child an allowance when they are old enough to understand how to spend it. You can make it their responsibility to pay for some things from their allowances. Movies, lunches, special hair care products or cosmetics might be their responsibility. They can have an envelope for each of their responsibilities. Help them to budget how much to put into each envelope. Make sure to have an envelope for savings and one to share. The sharing envelope can be to tithe or to give to a charity of their choice. Teach them that, "a penny saved is a penny earned." It will instill in them a strong sense of fiscal responsibility.

Have your child take part in family budgeting and bill paying discussions. Even if they just sit and listen they will learn that money is a limited resource for adults, their parents included. They also should learn that some things are not negotiable, such as the cost of utilities and mortgage payments. Let them know that if these are not paid on time there are stiff penalties in store for you.

Teach your child about the power of interest, compounded over several years it can balloon to a great sum in either debt or savings. Give them a calculator to work with ask them to compound one hundred dollars over ten or twenty years at a current savings rate. They will be amazed. Than show them the interest on credit cards and their eyes will pop. Have them work out just one year's interest on a one hundred dollar credit card debt. They will not be running eagerly to the mailbox with those credit card applications that are issued so freely in college. When they do get that first card, they will think twice about using it for pizza.

"Teach your children well." This adage applies to learning about money, how it can grow or diminish depending on how it is handled.