When it comes to teaching your kids the benefits of saving and investing, you've got to remember to keep it fun.
Personally, I think many of the books and Web sites on this subject try too hard to be “educational” and often fall flat when it comes to the fun factor. Here's what I recommend instead:
- My own kids have gotten most of their money lessons from toy cash registers, which they loved, and old-fashioned games that have a money bent, like Monopoly Jr. and Life.
- Still, most kids learn about money by watching their parents. The best way to teach them is to have them watch you make spending and saving decisions. Also, give them (or allow them to earn) some money of their own, and make them manage it. The most important lesson they need to learn is that once it's gone, it's gone. If you bail your child out when he or she is 10, you may still be doing it when they're 25.
Start ’em young
Want your kids to grow up to be big savers rather than big spenders? The younger they start, the better. One way to help them get on track: Teach them about delayed gratification.
- It's tempting for kids to spend their weekly allowance right away. Perhaps they can't wait for the piece of candy or pack of baseball cards. But rather than letting them spend the money immediately, consider encouraging them to put away at least some portion of their allowance each week. Let them know that the money they set aside can be used to buy something even bigger after just a few months or a year. The satisfaction they get from saving up for a video game console or a bike will last far longer than the sugar rush from a chocolate bar.
- You'll also want to show them you're doing the same thing. Let them see you depositing a check in the bank. Tell them that you're saving to buy something big — a new barbecue or a new car — then let them share in your enjoyment when you get it.
When they leave the nest…
Before your child heads off to college, it's very important for you to sit down and work out a spending plan. Most schools will give you an estimate of what you should spend on books, transportation and miscellaneous expenses — but make sure you understand how they arrived at those numbers.
- Estimates for undergraduate students range from about $2,500 to $5,000.
- If your child is planning to bring a car to college (and there are parking fees involved), the school's estimate may be way out of whack. Eating out, rather than on a meal plan, can also immediately put a monkey wrench in your budget.
Jean Chatzky is the financial editor for “Today,” editor-at-large at Money magazine and the author of “Talking Money: Everything You Need to Know About Your Finances and Your Future.” Her latest book, "Pay It Down: From Debt to Wealth on $10 a Day," is now in bookstores. Copyright ©2005. For more information, go to her Web site, www.JeanChatzky.com.