BY DAVID W. BIANCHI
Most parents would agree that it is important to teach kids about how to earn, manage and invest money but they don’t know how to go about it. The best advice is, there is no “right way” to do it, just jump in anywhere and let the journey begin.
Start with fun, every day teaching opportunities. Take your kids to the grocery store and show them what each item costs. Have them guess the total bill in the checkout line and give them a big “well done” if they get closer than you do to the right number. Do the same thing when the restaurant check comes to the table. Pretty soon they will look forward to winning the competition but they will be learning as they go along.
The next time you are at the mall, let them swipe your credit card when it is time to pay for something and then show them the credit card bill when it comes in so that they can see that all of those purchases add up very quickly.
Every time you look at the price of something with your kids, explain that you are spending “after-tax” dollars for the purchase. If the item costs $100, tell them your tax rate is 30% and let them figure out how much you have to earn to have the $100 left over so that you can buy it. They will soon understand the impact of federal income taxes.
Talk to your kids about the dangers of taking on too much debt and living beyond their means. Explain the importance of saving money each month and the security that can come from knowing that you are growing your savings and increasing your net-worth. Talk to them about developing a family budget and how you are able to pay your bills each month. They will get it if you explain it to them and repeat the lesson from time to time.
Studies have shown that kids who have a solid financial understanding by the time they graduate from high school have healthier and more mature attitudes about money when they start college. They are less likely to take on debt, more likely to have a checking account so that they can monitor money-in and money-out and they are more likely to save money.
As kids get older, once you get past the “birds and the bees,” talk to them about the “bulls and the bears.” They need to have some working knowledge of the stock market, how stocks are bought and sold, dividends, what a bond is, the power of compound interest and alternative investments. If Mom and Dad need to learn more about the subject in order to help their kids understand it, make it a fun family endeavor and do it together. Find a kid-friendly book that is written for parents as well as kids and set aside 15 minutes a few times a week to discuss it. The family will learn together and someday the kids will thank you for it.
A financial education need not be intimidating. If the information is presented in a simple, entertaining and educational manner you will be surprised at how much kids will learn. Just jump in and do it.
David W. Bianchi is the author of the recently released, Blue Chip Kids, What Every Child and Parent Should Know About Money, Investing, and the Stock Market. The book is available on Amazon, and more information is available about this subject at www.bluechipkids.com.