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The 7 Best Steps to Take to Set
Your Children Up Financially

You've talked to your kids about not smoking, instilled the difference between what's right and what's wrong, and perhaps have even taught them how to care ... but have you sat down and talked to your children about money?

kids money management

Giving kids a choice of what to do with their money (save, spend, invest or donate) gets them thinking about money management right from the start.

If not, you're not alone. Money, it seems, ranks up there with drugs and sex in topics that parents avoid talking about with their kids. Yet, according to a survey by the market-research firm GfK NOP, two-thirds of teens count on their parents (not their teachers or their peers) to teach them how to manage money.

Not teaching your children how to look out for their financial future is equivalent to "handicapping their children for life," says one financial planner in a U.S. News and World Report article. And it's easy to see why when you hear some of the startling statistics revealed by the Gfk NOP survey:

  • More than 1 in 5 teens didn't know that you have to pay interest if you borrow money.

  • Less than one-third of teens knew how to make a budget.

  • Only 36 percent knew how to open a savings account.

While talking to your kids about money is one important step, there are other, more action-oriented variables to giving your kids a good financial start. Simply taking the time to do the following tips below can mean the difference between financial success or failure once your children become adults.

The 7 Things You Need to do for Your Children's Financial Future

1. Talk to Your Kids About Money

More than one-third of kids said their parents rarely or never discuss finances with them, according to the Gfk NOP survey. How, then, are they ever going to learn about them?

kids money management

If your child spends all of his saved money, don't give him anymore until he earns it (or his allowance comes). This way, he'll begin to see the importance of sticking to a budget.

You should involve your children in financial discussions from early on. When they're young, teach them how you buy things at the grocery store (do you look for sales? Only come with $60 in cash so you don't overspend?) or give them a couple of dollars they've earned to spend as they please.

When kids get older, let them in on your budget (you do have one, right?) and talk to them about why you decided to allocate certain amounts to certain expenses. Let them in on how much is coming in each month, and how much you've budgeted to go out, so they know WHY you're not always willing to buy them designer jeans or shoes.

2. Give Young Kids an Allowance, Older Kids Money for Chores

When kids are too young to really "earn" their money, it's OK to give them a small allowance. For older kids, teach them the value of working for their money, and reward them accordingly. High school kids should be encouraged to get part-time jobs.

Now, when you give your kids their allowance, make sure you discuss it with them. Ask them how much they think they should save, how much they should donate to charity, how much they should spend and how much they should invest.

Though it can take some work to get kids to think about saving money, tools like the award-winning Money Savvy Pig piggy bank are a fun way to get kids, even those who are really young, to grasp this concept. The Money Savvy Pig -- there's also Moohla the Money Savvy Cow -- has four chambers, one for each of the "money choices" (save, donate, spend, invest) that children have when they earn or receive money.

These banks work so well because as kids make choices about what to do with their money, they're able to actually see the results.

The Money Savvy Pig & Cow Piggy Banks

Money Savvy Pig & Cow Piggy Banks

Winner of the Parents' Choice Foundation Gold Award and honored as a USA TODAY "Product of the Year," the engaging Money Savvy Piggy Bank and Moolah Cow Bank will teach your kids more about money in a few weeks than your parents ever taught you! That's why it has been recommended by so many other major media too, including:

  • Daily Herald
  • Baltimore Sun
  • Wall Street Journal
  • Parents' Choice Newsletter
  • Journal of Financial Planning
  • CBS MarketWatch
  • MSN/Money
  • Chicago Tribune
  • SFO Magazine
  • Real Estate Business
  • Chicago Parent
  • Journal of Financial Planning
  • Crain's Chicago Business
  • San Diego Union-Tribune
  • Arizona Republic

Read More Now!

3. Open a Savings Account for Your Kids

When kids are about 5 years old, they're old enough to have a savings account. Make an event of going to the bank with your child and opening an account for them. As they get money for their birthday, chores or other reasons, and the "Save" chamber of their Money Savvy Pig begins to overflow, take your child to the bank and have them deposit their money.

As your children get older, this account will have grown considerably, giving them a nice savings when it's time for college. Before that, use the savings account to help your children decide on some short- and long-term goals (such as buying a bicycle, a car or helping to pay for college).

4. Open a College Fund

Experts say you can start saving for your child's college education as soon as you're expecting. The earlier you do so, either by investing small amounts each month to mutual funds or allocating a certain amount each year to a government-run 529 College Savings Plan, the easier it will be to save up (and the less likely you are to get sidetracked with other expenses).

When the time comes for college, of course, don't overlook other sources of financial aid like scholarships and loans.

5. Let Your Kids See the Bills

It can be difficult for kids to grasp how quickly purchases add up. Let them see your credit card bills, utility bills, car payments and others so they get an idea of just how much things cost. Most kids will be shocked at how much you pay each month just for the necessities.

6. Be a Good Role Model

If your kids see that you're constantly spending more than you earn and not keeping up with bills, they are likely to repeat this scenario when they're older. Making sure that you stick to your budget and save each month for emergencies will set a good example for your kids.

7. Discuss Career Choices

Once your kids get older, talk to them about how much money they'd like to earn each year, and see if it corresponds with their career choices. Charles Schwab's annual "Teens and Money" survey found that teenagers expect to earn about $145,500 a year, so it's important to sit down and discuss the real amounts they can expect to earn from different jobs.

Recommended Reading

The 10 Dumbest Everyday Mistakes People Make With Their Money

Kids and Money: 5 Keys to Teaching Kids Money Management Skills


U.S. News and World Report


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