Teaching financial responsibility to kids: Finance

The old adage, "do as I say, not as I do" might work with bad driving but, as parents, we can't escape the lessons caught from our financial habits. An attitude of frugality, holding to a budget, keeping an emergency savings, or decisions on where to vacation on summer break are just a few of the things that kids see and experience under our supervision. If financial fitness is a habit you'd like to pass on to your children, start where you are…not where you think you should be. As a family, begin to have conversations about what it means to have an emergency savings and why: so that inevitably, as things go wrong, we don't have to go into debt to solve them

For budgeting, try to verbally share the cost of things as it is appropriate For example, for a kid asking to eat at Fiesta Mexico on Friday night, rather than a simple "no because I said so," offer them the true difference of a restaurant meal versus a taco night at home. Many also find success in giving a chore-earned allowance and encouraging kids to save money to spend on the video game or toy they want.

One lesson, unfortunately learned the hard way by many of us, is the concept of compound interest and debt. How many student loans have been taken out without realizing the long-term impact of that type of debt? Again, this is an opportunity for us to both explain and show. One way to show the impact of compound interest would be in the positive sense, with investing. Take a small portion of birthday money or reward them for good grades and place it into an investment account then let them watch it grow over time! Opening a bank or savings account can also have future impact for a child's decision to head to college: a recent study shows that children from moderate-income families, who have a savings account for college, are three times more likely to go to college, and four times more likely to graduate college even if the account holds less than $500. As with anything in parenting, just start somewhere, and let's work together to build financially-savvy kiddos!