Here’s how to raise financially healthy kids – and the mistakes to avoid
You want your kids to have a healthy financial life, but knowing how to achieve it can be confusing.
This can be especially difficult if you have your own financial difficulties. Yet teaching them as early as possible can make a difference.
“There is a lot of misinformation that they will be exposed to later,” said Sheila Bair, former president of the Federal Deposit Insurance Corporation, an independent agency that insures US banks.
She is also the author of children’s books focusing on money lessons. His latest came out this week – “Billy the Borrowing Blue-Footed Booby” and “Princess Persephone Loses the Castle”.
Here’s how to help your kids get on the right track, and what to watch out for.
Be aware of your behavior
Children learn by watching their parents. Yet many people give bad examples when it comes to money, said Bair, a member of CNBC Invest in You Financial Wellness Council.
“A lot of adults don’t always manage their money as well as they should,” she said.
For example, if you buy something that is beyond your means or do an impulse shop while you are dating your child, they will see it.
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If you’re stressed out about money, admit it. This can prevent you from imparting healthy behaviors to your child, added Melanie Mortimer, president of the Securities Industry and Financial Markets Association Foundation. The organization is the investor and financial educator arm of SIFMA, a business group representing securities companies, asset management companies and banks.
“It’s one of the least recognized barriers to better financial literacy in this country,” she said.
“Getting comfortable is really important, and separating your own bills and debts from the need to educate your child, I think is essential.”
Talking about money with your kids is important, but how you do it is also crucial.
“Don’t be didactic, don’t wiggle your fingers,” Bair said.
Instead, have conversations around the dinner table about things like saving money and budgeting. With younger children, stick to simple concepts and as they grow older explore things like the rewards of earning a stipend or ideas for making money.
Use real examples
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When you shop, show them you are paying for items and even compare them.
If you are using a credit card, be sure to explain how it works.
“It doesn’t really resonate with mum and dad spending with this card, but there is their hard earned money behind this card that is actually going to pay off regardless of the purchase,” Bair said.
Introduce investment concepts
By the age of 9, children usually begin to use fractions and percentages. So now is a good time to start teaching them how to invest, Mortimer said.
The SIFMA Foundation’s stock market game is used in schools and through community organizations, and is also available to individuals on its website.