Family and Relationships

Start Good Saving Habits Early

By Ginita Wall, CPA, CFP

Ask savvy investors how they learned their first lessons about money, and they’ll probably tell you lessons their parents taught them.

The money values we learn as children stay with us the rest of our lives. If you are a parent, teaching your children the value of saving and investing will benefit them the rest of their lives. Here’s what you can do:

• Help your child begin to save. Open savings accounts for your children, and teach them how the bank adds interest to their savings that makes their money grow. Encourage your children to save a little from every bit of money they receive, such as allowances, birthday gifts, etc. You may even want to set up a matching program, contributing fifty cents for each dollar your child saves.
  
  
• Teach your child about stocks. A child in elementary school can start learning about how businesses work. Once your child understands the basics, ask her to think about some of the businesses that might be good stock investments. Then use Morningstar Mutual Fund Guide (available at your library) to find a quality mutual fund that holds some of these companies, or a mutual fund that caters to children such as the Stein Roe Young Investor fund. Many funds accept regular monthly investments as low as $50 a month, so these funds can be a good way to teach children about the stock market while saving for their college education.
  
  
• Encourage early IRA saving. The new Roth IRA is a great way for children who are working summers or after school to begin saving for their future. Imagine how much money you’d have today if you had saved $3,000 a year since you were a teenager!
  
  
• Let your kids handle their own money. We all learn by doing, so letting your kids manage a segment of their budget will let them learn valuable financial lessons. They may make mistakes, but they will be small mistakes that may help them avoid larger mistakes as adults.

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