Everyone wants their children to have a solid financial foundation. Of course, here in America, education is our primary way of building financial stability for them and giving them the tools they need to succeed. Unfortunately, schools can be expensive, and many parents worry their children won’t have enough money after graduation. That’s why you must start teaching your kids about the importance of investing now while they are still young. These eight tips will help you give your children an outstanding financial education and ensure they are ready for the real world.
1. Teach Your Children About Compound Interest
It would be best if you shared the value of long-term investing with your children. Teenagers might have to work summer jobs to help with college and living expenses, but many parents give their children part-time jobs when they are very young. Make sure you teach them about how compound interest works. Don’t just give your children an allowance – show them how much better their money can grow with careful savings.
2. Talk to Your Children About Stocks
It would be best if you gave your child a fundamental understanding of how stocks work. Stocks are shares of ownership in a company. They allow shareholders to receive dividends and right in the company when it does well. When the price of a stock goes up, so makes the amount of money that shareholders earn when they sell their shares or receive dividends from them. When you explain this to your children, clarify that stocks are hazardous, so they should only invest in them after they have a solid financial foundation.
3. Help Your Children Open Investment Accounts
There are plenty of ways for you to help your children start investing. Some parents choose to open a brokerage account for their kids so they can start learning about investing and earning interest right away. Other people choose to open mutual funds. Either way, it’s a good idea to give your children at least one bank account they can easily access so they can see how much work goes into investing and how much they earn.
4. Explain How Companies Work
Even though you might think that your child won’t need to learn about the inner workings of a business, it would be wise for you to explain the basics to them. Companies spend billions of dollars yearly on advertising and marketing, so your children might want to know what goes into making up those commercials. Explain how some companies decide whether or not they will pay for their ads and how other companies determine what makes their ad campaigns most effective. These steps help large and small companies, so you should explain how important it is to be an exemplary businessperson.
5. Teach Them That Money is Earned
The American Dream is about working hard and making as much money as possible. While this is a great lesson to teach your children, it’s essential that you also stress that money is earned. Your children must know they must work hard and earn money correctly if they want money. Teaching your children that stealing or lying isn’t the right way to make more money would be best.
6. Show Kids the Value of Giving
Another critical step in teaching your children about money is to teach them the value of giving. When you decide to help children learn the importance of giving, it’s best to start with small donations and work your way up. For example, if you’re helping a neighbor paint their house or organize their yard sale, consider asking your child if they would like to donate a little of their allowance to charity. This can help show them that everyone benefits when they give away some of what they have earned.
7. Be Prepared for the Next Economic Crisis
Though your children are only young, they could still face trouble in the future. You must teach them enough about money so that they can help their future selves when they do have financial problems. Teach them how to use credit cards responsibly and encourage them to read books about money.
8. Understand Impulse Buying
Your children will learn more about money when they are older, but you can help teach them from the beginning. Impulse buying is a part of their toddler years, so you need to set limits on where you let your children spend their money. If they want to buy something that you tell them is too expensive, try explaining how companies make money by producing popular things and letting people pay a lot for them.