This can start very early with an exercise as simple as a three piggy banks analogy. You encourage the child to divide any money he or she receives into three piggy banks: spending, saving and community/charity. This shows the concept of different purposes of money rather than having it all be for spending. Repeating this exercise can help ingrain the habit of saving regularly. Every child should have a tool kit of basic financial literacy skills by age 18, including concepts such as how to spend, how to save, how to give and the value of a dollar. By late childhood or adolescence, parents can add concepts such as what it means to invest, what companies one might invest in and how to assess risk with an investment.
For example, you can incorporate financial responsibility into an impromptu math lesson about money: If you find something the child wants that originally cost $100 and is on sale for 30% off, you can ask how much the new price is – and, now that they are only spending $70, what they might do with the leftover $30. It can be difficult to find time to sit down and talk specifically about money but natural opportunities to teach pop up practically every day.
2. Take a lifelong view toward financial literacy 1. Find teachable moments
3. Show how it’s done Your child’s healthy relationship with money begins with an open and honest relationship within a family that models good money behavior. These discussions can be challenging but the fruit is well worth the labor. If you’re able, and they have earned income, offer to match what they save into a Roth IRA. It’s also wise to encourage contributions to a 401(k) at work.
And parents and grandparents can continue to encourage responsible, long-term financial responsibility by giving young adults an incentive to begin saving for retirement early. You can encourage children in high school to think about college expenses by examining the costs and coming up with a credible college budget. Ask them to consider basic questions: What will you need in order to make this happen? What will the family need to supply and what is the student expected to supply in terms of tuition, books, room and board, transportation and normal spending money?
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- MARTINEZ: Steps to raise children with financial intelligence | Local News
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