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Bad
habits are hard to break. But good
habits also tend to stick around for a
long time. That is why you will want to
teach young children about the
importance of saving and investing. It
is almost never too early to start, and
your efforts can provide a lifetime of
benefits.
By the time most children
are 5, they have more than enough
cognitive skills to understand the
basics of saving money. Of course, the
older they get, the better equipped they
will be to handle more sophisticated
concepts of investing.
In any case, when your
children are young, start them off on
the right financial path by taking these
steps:
Set attainable goals.
Children will be more motivated to save
money if they can see themselves
achieving goals. And that is why you
don't want to burden them too soon by
trying to get them to save for a
long-term objective such as college.
Such a goal may well be appropriate,
even desirable, when children are a bit
older, but when they are quite young,
have them put money in a simple savings
account for things like toys, video
games, CDs, etc. By putting away money
regularly and seeing how their efforts
are rewarded, children will learn
something about financial discipline and
delayed gratification. They are likely
to be more appreciative of their
possessions.
Reward children's
efforts. To help children learn to
save and invest, you may want to offer a
helping hand. Specifically, consider
partially matching children's deposits
into their savings accounts. If you were
to put in a quarter or 50 cents for
every dollar they deposit, their savings
will have an opportunity to grow faster
and they will feel they are getting
bonus payments.
Make investing fun.
Try to get your children or
grandchildren involved in picking and
following a stock for fun. If your
children are interested in athletic
shoes, for example, take a research trip
to the nearest sporting goods store and
study which shoes seem to be most
popular. Also, ask your children what
types of shoes their friends are
wearing. If your children are old
enough, you may also want to go over
annual reports and other financial
information about the stock, but don't
get too bogged down with numbers,
especially if you see your child's eyes
glaze over. Do, however, follow the
stock's price and discuss the factors
that may or may not be causing this
price to rise or fall.
Stress the long-term
nature of investing. Stress that a
stock is not the same as a bank account,
and educate them to let them know this
type of investment is not for impulse
purchases or to meet short-term goals.
Instead, tell your children that stocks
are for the long term. You might want to
share with them some of your brokerage
statements that show how many years
you've owned some of your investments.
By following these
suggestions, you can help your kids
develop good savings and investment
habits. Talk to them soon. |
