It’s never too early to teach your child about finance. Whether they have aspirations of being Wall Street Wizards or not, your child will need a solid foundation to avoid the pitfalls that usually accompany early adulthood. So here are five great ways to teach your kid about finance.
It all starts here. Children need money that he or she can call their own. That way when they buy something with it, they get firsthand experience of how business works in the real world. It might be for the best to have them earn it as opposed to being a gift. Working for a wage is something they are going to have to get used to so why not start them off with it? They’ll make the connection between effort and reward. The more work they do, the more money they earn.
2. Take Them To The Store
Instead of moving zombie-like up and down the aisle while shopping, bring your child along and explain to them how and why you are selecting items to buy while passing on others. Kids are sponges and your child will soak up this knowledge for future use. How to stretch a dollar is a great skill to acquire early in life.
3. Bank Account
Opening a bank account for your child is another way of providing hands on experience. If your kid is old enough, turn control of the account over to them. Let them deposit and withdraw for themselves with the small amounts of money they have. They’ll learn a lot about how and why to save.
4. Teach Them To Budget
This lesson is invaluable and should be instilled as soon as humanly possible! The best way to do this is to listen to your child. If they are pining for some gadget, clothing or doodad, sit down with them and explain how they can save up and get it. Show them how saving so much every week will eventually give them the money they need to acquire the precious item. Also, a lesson in delayed gratification never hurt either. They might find that after saving up for the “must have” item, they no longer want it down the line.
5. A Stock Of Their Own
If you want to teach your child about finance and the financial world, why not have them become a part of it? Get them a stock of their own, show them how to track it and explain what it means when it rises or falls. This will help them see that sometimes one’s wealth, or lack of it, can be dependent on outside forces beyond their control. As kids tend to view themselves as the center of the universe, this lesson will help open their eyes to the big picture and they’ll see that sometimes things don’t work out regardless of what you do while other times they do through no effort of you own.
Andrew Salmon is an author and freelance writer based in Vancouver. He writes for a number of financial websites.