Tuesday, March 22, 2011
Teaching kids to save money
BY SHERRY THOMAS
At the ripe old ages of 7 and 8, I handed my then 'little boys' a savings passbook and told them how grownup they now were to have their very own place, a money house that does nothing but protect their money. They didn't quite understand it until we made a trip to the bank.
For the bank tellers, almost as much as myself, it was such a kick watching two little men walk into the bank, proudly hand over their deposit slips and get a great big smile from the person behind the glass window. There was always an "Aww" or "Ahh" generally accompanied by "What a great idea. You're
starting them really young!"
Teaching your children about money and money management can begin early in life. As a matter of fact, I highly suggest it. It appears that it is one area in which we, as parents, may fall a little short. By not impressing upon them the value and discipline that accompanies money, you are doing them no favors.
As I write, I would like to say that I as a part-time Professor at a college where I teach these same principles to adults, I hear all the time, "I wish someone had told me this and had forced me to do this when I was younger." No one took the time to explain how to hold onto the money they were gifted or earned. No one had explained that money is needed for future retirement.
I'm an advocate of teaching children everything there is to know about money - interest rates, CDs, savings, allowances - you name it - and explaining to them how money "grows." Now, given the current state of the economy, the elephant in the room is that there aren't many places that provide a good example of money multiplying. However, this is the analogy that I often use. If most any one of us sees a dime, a nickel and yes, often a penny on the ground, we will stoop down to pick it up. It's free money. Well, any interest earned on our deposits, whether it be 10 percent or even a half a percent, is still free money.
The progression I've made with my boys is to collect enough in savings to make the minimum required for a CD. We then lock it in for 12-13 months, provided the CD pays more interest than that of the savings.
Through the years, the boys have watched as their allowance has grown into something rather substantial. I allow each son to read the monthly statements and compare how much "free money" they have accumulated.
I also have taught them my 80/20 rule: 80 percent of any allowance goes directly into savings; 20 percent can be used for pleasure. That's it. If that equates to one movie ticket, so be it.
Money management is something vastly overlooked in the education system. Start now and teach them valuable lessons for life. After all, learning now will allow the concept of savings to become more of a habit and an expectation, a discipline rather than a painful feeling of deprivation.
Sherry Thomas is president of The Palm Beach School of Etiquette and Life Skills. Follow her on Twitter @EtiquetteQueen.