By Barbara Pronin
The money habits children develop while they’re young can help form habits that guide their financial future, and the younger they are when they learn good money habits, the more likely they are to value them.
Financial editors at the money and investment site, The Motley Fool, suggest the five most important money tips you can teach kids at an early age:
1. Money grows – It has the potential to earn you more if you stow it properly. Show your kids that if you put $500 into a savings account at just one percent interest annually, you will have $552 in ten years with no more effort on your part. As your kids get older, you can explore more lucrative earnings efforts, including investment opportunities.
2. Look for value – There’s nothing wrong with buying what you want, but you can make the effort to spend less for it if you wait until it goes on sale or consider a store brand instead of a name brand. You can show kids how this works with a trip to the supermarket, and teach them to research the differences between products.
3. Saving is less expensive than borrowing – Kids, like many adults, want what they want when they want it. They may not have access to credit cards, as adults do, but next time they want something they don’t have enough money for, offer to lend it to them. But charge interest. Once kids see that borrowing entails extra cost, they may see the value of saving up.
4. Your friend’s money is none of your business – When your kids are trying to ‘keep up with the Joneses,’ explain that they have no idea how much their friends have or where there money goes or is coming from. It’s wise to focus on your own situation, rather than on someone else’s.
5. Know that your time has value – Kids should be willing to work to earn money, but understand that their time has value. Selling lemonade on a quiet cul-de-sac with little foot traffic, for example, may not be a good investment of their time. Having a strong work ethic will be valuable all their lives, but they should understand that time and effort have worth.