Good Ways To Teach Your Kids About Money
Warren Buffett is the third richest man in the world and one of the most financially savvy individuals that has ever lived. Buffett’s prowess for investing probably wasn’t engrained at birth; he learned it. If you want to help your child become a financially responsible adult, you have to start teaching them about money early and use every available resource, such as personal finance software like Quicken, for teaching kids money skills. It is important that they develop a strong command of the basic principles of money management.
A great financial book is always a good starting point for parents trying to teach kids the basics of personal finance. The Oracle of Omaha claims to have read every book in the public library on investing by the time he was 12 years of age. There are a number of books available on all types of financial topics – saving money, investing, managing debt, making money – for children in elementary school all the way up to teenagers in high school. Finances don’t have to be a bore for your child either; teach them that learning about money can be fun and useful. Your goal should be to create a foundation of financial literacy for your child by giving him a wide variety of financial books that will teach prudent financial principles that will last a lifetime.
Physical money is an effective tool when dealing with children in their middle and high school years. You can show your teen the value of a dollar by rewarding them with money for performing jobs around the house. Your child will learn to appreciate work and will think twice before hitting up the Bank of Mom and Dad for a loan in the future.
Opening a savings account at your local bank is an incredibly effective way to show your child the magic of compound interest. Take your child to the bank once a week and let them make a deposit into a savings or CD account. Every month, show your child the bank statements so he can see the balances increase as the deposits grow and interest is compounded each month. Some parents provide an even bigger boost (and a greater incentive to save) by matching some or all of what their children decide to put in savings.
After your child has mastered the art of saving, start her on the road to investing with a stock or mutual fund. Buffett has amassed a net worth of $50 billion dollars because of his investing prowess. You can create a mini-Buffett by buying your child a share of stock in his or her favorite company. One share of Nike, Disney or DreamWorks could spark your child’s interest in investing and put your child on the path to building wealth at an early age.
Mark Riddix started writing in 2007 and has been writing online since 2008. Mark has written for Forbes, Investopedia, New York Daily News, Google Finance and Yahoo Finance. He holds a bachelor’s degree in finance from Oral Roberts University.
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