How do I Raise Financially Savvy Kids?

How do I Raise Financially Savvy Kids?  The road to financial freedom starts earlier than you might think, and the groundwork you lay in those formative years could have enormous implications down the line. Here are some tips you can use to raise money-smart kids in a world of instant gratification and rampant overspending.
Study after study has shown that both poverty and financial security tend to follow generational trends. Children who are born into well-to-do families are more likely than their less well-off peers to finish college and enjoy success in their careers.

At the same time, the children of impoverished parents are more likely than most to follow in the footsteps of those who went before, and breaking that cycle of financial dependence has remained an enormous challenge through good times and bad. So what can you do to tip the odds in your children’s favor? How can you set your own son or daughter up for a life of financial security and career success?

Set a Good Financial Example for Your Kids

As a parent, what you say matters, but not nearly as much as what you do. Children learn about finances, and everything else, by watching the adults around them, and if you do not set a good example, your kids may not listen to what you have to say.

Raising money-smart kids starts with being a money-smart parent, so set a good example for your kids by avoiding debt, paying bills on time and investing wisely for the future. In the end, your kids will learn from your example, even if they do not appear to be paying any attention.

Establish Saving Goals for Your Child – Start with Big-Ticket Wants

As your kids get older, the size and cost of the things they want will likely increase. A new iPhone could set your son or daughter back nearly a thousand dollars, and the latest technological gadget could cost hundreds more.

Nothing reinforces the value of a dollar like saving for a big-ticket item. The next time your son or daughter asks for an expensive gadget, set up a savings plan to make it happen. If you like, you can kick in part of the cost, but the main burden should lie with your child.

Offer a Matching Program for Savings with Your Child

For the average worker, a 401(k) match is like finding free money, yet a surprising number of employees leave that free cash on the table. If you want to set your child up for future financial success, teaching them the value of matching funds is a good place to start.

If your teenage son or daughter is working an afterschool job, encourage them to sign up for the company 401(k) plan if one is available. Offer to match the amount the employer kicks in as a way to encourage saving and investment.

Even if your child is not yet working, you can use this matching funds strategy. Simply have your son or daughter open a savings account, then offer a match on the money they contribute. It could be a dollar for dollar match, a set percentage or anything else that works for you and your own finances, but in the end, this simple strategy should encourage more saving and investing.

It is not easy to teach kids the value of a dollar, especially when an instant gratification attitude and an attitude of conspicuous consumption still prevail. Even so, there are things you can do to teach your kids the value of a dollar, increasing the chances they will grow up to be financially savvy adults.