It does not matter what age they are kids are very impressionable. All parents want to teach their children the smart tools in life however it up to the parent on how they teach their child these things and exactly what they teach them. We all know that teaching them the basics of life is a necessity however what we do not realize is that we also need to teach them about money as well and one of the important things we can teach them is about investing.
Do Not Be Embarrassed
One of the most important steps in teaching children about money and the power of investing is to be very open with your kids about your own personal finances and any investments that you may have. You should not be embarrassed about your financial position. Your kids need to learn and will benefit from your openness about your investments. You might find it difficult to start a conversation regarding this topic with your children. A good time to have this conversation may be when you are paying your monthly bills. With this approach they can see how the investments you are making help to pay for those living expenses every month.
Open Your Child Their Own Bank Account
Many think that it is a crazy idea to have a bank account for a child. However they are never to young to learn the power of saving. If you open your child the right type of a savings account it will be one that will earn interest every month. With this type of investment your kids will see a monthly interest payment. It might not be a lot of money coming in but anything is a lot to a child. Once the account has built up to enough money you can open a different type of savings such as a certificate of deposit where the amount of interest that is earned is much more than a typical savings account.
Open A 529 College Savings Account
Opening a 529 college savings account is a great idea if you do not want to spend the money your child gets for their birthday or Christmas every year. You will find that these accounts will give the account much more than the typical one percent or less in interest that a regular bank savings account will be paying. When you get the monthly statement on this account every month you should sit down with your child and show them the activity in the account and explain to them exactly what it all means. Without this guidance you will find that your child may not know what he or she needs to know when they get out on his or her own and may end up in financial trouble.
Watch And Track A Favorite Stock With Your Child
The best way to start this practice is to let your child pick the stock of a company that they like to frequent. For example Toys R Us or even something like McDonald’s. You should sit down with your kids on a weekly if not a daily basis and show your child how the stock is doing. This gives you the opportunity to explain the basics of stocks to them such as the balance sheet, gross revenue, expenses and net profit.
Teaching your child financial responsibility at a young age is all up to you and your parenting skills. It is more important to teach this kind of behavior rather than the behavior that most would cringe at such as yelling, screaming and cussing. Remember that as a child most of what your child learns will be from you.