One of the most important life skills you can teach your child is how to save or, more specifically, why it’s important to save. My parents would often bring me to the bank as a small child and I observed my mother writing and cashing checks, depositing money, etc. By the time I was 7 or 8 my parents told me about a little blue passbook they had opened for me when I was born. The passbook (or savings account) contained some regular deposits and a healthy amount of money. I had no sense of the value of the account or what the cash really represented, but I do remember my parents telling me:
2. Once you put money into the little blue book you really do not want to take it out.
3. The bank will give you some money in return for keeping a little blue book full of money.
The lesson above was very simplistic; namely, that saving is good and should be taken seriously. Beyond setting up a savings account for me, my parents also exposed me to their financial goings-on from a very early age (I knew for example how much my father made via his paycheck, what our tenants would pay in rent each month, and how much my dad would collect for small handy-man type projects). My parents hid nothing about our financial life or status, so I was “in the know” from a very early age. Some experts have argued, especially in light of the recent recession, that parents should aim to shelter financial goings on from their kids given stress, anxiety, etc. And while every parents should customize parental advice for his or her child (read: understand what type of child you have and adjust parents style), I believe in empowering children and raising smart, pragmatic, kids who will be ready to face the world!
So, when beginning your child’s fiscal eduction you want to make sure you do the following:
1. Set up a savings account and describe what it is meant for and how you make regular deposits.
2. Expose your child to every inch of your family’s financial life (in a sense treat the child as an adult and describe how much money the family makes <and the different sources of money>, what the family does with money, and what money can and cannot provide).
Start the personal finance discussion slowly and make it as easy to digest as possible. That is to say, talk about saving money and not interest rates or how money is needed for a home, food, and security and not to buy video games, go out to eat, or impress people.