As a financial planner, I’m often asked when people in general should start learning about good saving habits and how to plan for the future. My answer is “right from the very beginning.”
It’s vital to teach children the importance of a good work ethic and of being financially independent from a young age.
What you see is what you’ll get
The way that you perceive money is often learned from what you saw in your childhood. Therefore, if you’re constantly borrowing money or spending indiscriminately, chances are that your children will absorb the same habits. It’s no coincidence that in certain cities, some neighborhoods are populated by families who haven’t worked for a generation or two.
You can’t tell the future
Another reason to educate your children towards financial independence is that you never know what the future may bring. You might think that you will always be able to provide financial support for your married kids, but what happens if your investments take a nosedive or you need the money for unforeseen medical expenses?
Furthermore, as anyone who has supported adult children will tell you, money and family often don’t go together. Tensions surrounding money issues are the cause of many major rifts between the generations.
When do you start?
When your children are little, you can give them two small coins each day. Get them to put one inside a charity box and the other inside a piggybank for saving. Show them after a week or two how the money has piled up and they can buy themselves an inexpensive present. Show them how their charity can help other people.
As your kids get older, base an allowance on chores done around the house to instill the concept of working for money. If your children want a new toy or gadget, don’t just give it to them. Teach them how they’ll get the money for it by saving some of their allowance, doing a babysitting job, or mowing lawns,
Take your children to the store with you and show them how you choose products, how to work out when a special offer really does save you money and when it’s just a slick marketing ploy. Tell them that the money in the ATM doesn’t just appear at the touch of the button. It has to be paid into the bank first. Similarly, credit cards always have to be paid for, and when you write a check, you aren’t simply “inventing” money that isn’t there.
As your children grow older, they need to learn basic money and budgeting skills that, sadly, are not taught enough at school. Hopefully, they will carry these skills with them into the future and learn how to work for their money and save successfully.
The gifts of financial knowledge and independence are the greatest presents you can give to your children, and it’s never too early to start.
About the Author: Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd, a financial planning firm located in Jerusalem. He specializes in working with clients in New York, Florida, and Israel and is a licensed financial professional both in the U.S. and Israel. Securities are offered through Portfolio Resources Group, Inc., Member FINRA, SIPC, MSRB, SIFMA. Accounts held at Pershing LLC., Member NYSE/SIPC, a subsidiary of The Bank of New York Mellon Corporation. Neither Profile nor PRG gives tax or legal advice. Before immigrating to Israel, it is advisable to consult with a tax attorney who is knowledgeable about Israeli law. Doug’s newest book The Expatriates’ Guide to Handling Money and Taxes is available at www.expatguidetomoney.com. He hosts a weekly finance show, Goldstein on Gelt, on internet radio. Listen live or download podcasts. Toll-free from U.S. 1-888-327-6179, Jerusalem: (02) 624-2788. Follow on Twitter: @DougGoldstein or contact at firstname.lastname@example.org.
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