From Toddlers to Teens: Forming Good Money Habits
By Saghir Aslam
Rawalpindi, Pakistan
(The following information is provided solely to educate the Muslim community about investing and financial planning. It is hoped that the Ummah will benefit from this effort through greater financial empowerment, enabling the community to live with dignity and fulfill their moral obligations towards charitable activities)
One responsibility that goes hand in hand with being an adult is managing personal finances. Unfortunately, many adults learned money lessons the hard way— without any formal education on the subject. Many parents, however, say they don’t want their children to make the same money mistakes they did.
When it comes to teaching your children to save and invest, open and honest talks about money should begin at an early age. What you say—or don’t say— about money matters has a profound effect on how your kids will handle their finances later on.
Sharing important money lessons:
Parents are the single most powerful influence in their children’s long-term financial lives. With such influence, it seems logical parents would jump at the opportunity to teach solid life lessons about good money management. However, this isn’t always the case. What keeps parents from opening up the lines of financial communication? How can they begin to teach those important lessons, such as how to save and invest?
High Net worth Planning with Advisors, says a lot of families are skeptical of sharing how much money they have. They’re afraid their kids might not try as hard. He believes, “They’re afraid of spoiling the kids, or the kids may think they’ll have a free ride.”
Many families grew up not talking about money, treating the subject as a very private affair. “I think that is a trait that a lot of our grandparents and parents have passed on. So, it’s overcoming that, and learning to be comfortable talking about it. It is uncomfortable for many people to bring up money, because they were never taught how to talk about it themselves.”
Overcoming those fears can begin simply and slowly, with a short conversation. “Each brief conversation might lead to more, and if you start with small things, it will eventually become more comfortable. It’s not something you do all in one day,” he says.
Have open and truthful conversations:
The kind of openness that is not always easy for parents, especially parents of means. “It is kind of a double-edged sword that people are worried about,” he says. “If you show everything, you worry that your children could lose ambition. If you hide everything, there is a danger that they won’t know how to handle it. But if children are prepared to handle money, they’re more likely not to blow through it and to realize the importance of their decisions.”
The truth, however, is parents are teaching their children about money every day. Are they aware of the lessons they’re teaching? “Whether the parents realize that they’re teaching this information or not, the child is learning everything from the parent.”
Choosing to teach sound financial lessons, even if it takes you out of your comfort zone, is an investment in your child’s future—something every parent can appreciate. Here are some tips on how to get started:
• Introduce kids to dollars and cents. Teach them the value of each coin and how to make change.
• Explain the concept of earning money. Talk about going to work and what the money you earn pays for.
• Respect money. Show how small amounts of change saved in a jar can add up to a large sum of money.
• Give your children an allowance. Tie their allowance to weekly chores to help instill the concept of earnings.
• Help set savings goals. Help your child figure out how long it will take to save for something he or she wants to buy.
• Match their savings. Give your child incentive and help increase their savings quicker.
Use teaching tools that give kids money skills:
Understanding the value of saving begins simply and grows over time. “I don’t think saving really means much until your child sees what saving can do, that you save up for things you want.” (“So a younger child has a want, and he or she saves for that goal. As children get older, those dollar amounts and the things they want are going to get more expensive. The time between saving and spending will become wider too.”
Making the concepts of money and saving concrete for children is something parents have been doing for generations with piggy banks, jars, or savings account passbooks. Today’s tech-savvy kids have a number of online tools to help them grasp these timeless concepts. Choosing to teach sound financial lessons, even if it takes you out of your comfort zone, is an investment in your child’s future.
Online learning centers can also help to educate children and parents on money management. Wells Fargo offers its Hands on Banking® program for children of all ages. It provides tips on taking your child’s money management skills to the next level, including how to make spending decisions, open a savings account, get a credit card, invest in the market, and give to charity. This resource and countless others can help reinforce the basics of money management in fun and interactive ways.
Broaden the scope:
Helping your children understand the basics of saving is a great building block for introducing them when they are older to your financial institution and even to investing. Many banks and investment firms offer relationship pricing, which enables a young person to build up savings slowly in an account without some of the common minimum balance requirements, because his or her parents have a relationship with the institution.
Even young children can understand basic investing. “If kids can save up enough money to invest in a mutual fund or something they can understand, that’s going to teach them more about financial management and managing a little bit larger amount of money.”
(Saghir A. Aslam only explains strategies and formulas that he has been using. He is merely providing information, and NO ADVICE is given. Mr Aslam does not endorse or recommend any broker, brokerage firm, or any investment at all, nor does he suggest that anyone will earn a profit when or if they purchase stocks, bonds or any other investments. All stocks or investment vehicles mentioned are for illustrative purposes only. Mr Aslam is not an attorney, accountant, real estate broker, stockbroker, investment advisor or certified financial planner. Mr Aslam does not have anything for sale.)
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