Give Your Kids An Edge – Teach Them About Money Early In Life (Post 2)
Last time, I discussed my plan for teaching my son about money through age 10. This post will discuss my thoughts about how to approach the most challenging group – teenagers.
Age 11-18:
This is the critical age group; and probably will be my last chance to teach him about money. There are many things that you can do in this timeframe:
- Open a savings account. Banks realize that children are prospects for future loyal customers, so some may offer extra incentives. They should at least offer accounts with no fees or balance minimums.
- Let them get a job to earn any extra spending money they need.
- Talk to them about credit (this is a big one!). There are many simple things that they should know: how interest works, why you should pay bills on time, why you shouldn’t max out a credit card, and how any issues on your credit record can lead to problems getting a job, obtaining a loan, cell phone, or an apartment.
- You may want to think about getting them used to a debit or credit card. Look into prepaid cards, link them to your account (so you can monitor their purchases), or get them a card with a low credit limit. There are many options here, so be sure to do your research to find the best solution for your situation. If you cosign for the application, just remember that you are responsible for the debt too. Credit card companies heavily target college students, so teach them proper use of these cards before you send them off.
- Introduce them to investing. Talk about stocks, bonds and mutual funds. Tell them how you are planning for retirement and the challenges you are facing.
- I will share any mistakes that I have made in the past and how they could have been prevented.
Once he turns 18, I should be able to recognize his established money habits. If he has learned well and has proven that he can make good decisions, there may not be much more to be taught. If, however, he still seems to be making poor decisions, I will probably keep a closer eye on him.
That’s about it; I want to keep it simple, yet reinforce all the important things he’ll need to know. If you decide to take a similar approach, just be aware that adjustments may be needed for your child and your situation.
For supplementary information about teaching money concepts to children, please take a look at the following sites:
Again, I believe that many of the problems Americans face today are a reflection of our limited knowledge about money and financal education earlier in life. While there are no guarantees that my son will not have his share of financial difficulties, I can at least find comfort that I have done my part; the rest is up to him.
Again, if you have any comments or ideas on what has worked for you (or what hasn’t), please post them – they are greatly appreciated.
Kevin Jaegers, Senior Investment Advisor
January 7th, 2009 at 3:13 pm
perhaps one of the greatest investment tools for our children is ROTH IRA’s. It will teach them how to nvest and help them to pay attention to market influences. And if they start young (when they start working which is when they are
eligible) the compunding return on investmnent over 40 years gives them a nice nestegg even if they have to stop investing as they get married/start a family/buy a house etc. as long as they can avoid withdrawals. However by then they will hopefull know the first rule is to pay your savings first.
January 8th, 2009 at 2:07 pm
I work in the financial services industry and have to say it is VERY alarming how little a large number of consumers understand even basic finances. Start the concept of managing/saving money early with your children. Many financial institutions offer not only incentives for saving but educational materials free of charge to help parents have meaningful discussions on the subject. Look for materials that talk about financial concepts in general and not account information specific to the sponsoring bank. It is readily available out there….