Dollars and cents can make sense to kids
The well-recognized symbol of a pink ceramic pig is understood to indicate saving money.
Kids put pennies they find on the sidewalk into their piggy banks and wait for the day when they have enough to buy anything.
But how can parents step in and help their children learn how to save money and effectively spend it?
If children are taught how to be smart with their money, they will take those skills with them into adulthood and remain financially conscious.
Terrence Hassanally, a local financial advisor with Waddell & Reed, in Rochester, says, "at the heart of education is communication."
Here are four other tips that he gives to parents of young children on how to teach them about money.
1. "Learning to handle an allowance"
Some parents give their children an allowance accompanying a weekly chores list, while others give them one without any extra expectations. Either way, Hassanally says, "a rule of thumb used by parents is to give your child 50 cents or one dollar for every year of age." Several factors go into negotiating an allowance amount, such as how much will go into the child's savings and the chores they are expected to complete. But with an allowance comes a discussion to be held about what purchases the child is expected to make and how much money they will save, in order to be able to anticipate how their allowance will be handled.
2. "Opening a bank account"
Hassanally advises parents to take their child with them when they open a savings account for them at your local bank. The child will learn how the savings account will work, and being present for opening it will get them excited to make future deposits. On that same note, Hassanally says, "Let your child take a few dollars out of the account occasionally. Young children who see money going into the account but never coming out may quickly lose interest in saving."
3. "Setting and saving for financial goals"
Introduce the idea of saving money over a period of time to get what they really want instead of spending it all in a moment on something useless. When kids get money as gifts, teach them to put aside a portion into savings, give some to a charity of their choice, and then have the remainder to spend however they would like.
4. "Becoming a smart consumer"
Kids love to jump on bandwagons, so they may be tempted to spend their money on a mere fad that will fade away and your child will lose interest in within a few days. Hassanally tells parents to take their child shopping to get ideas for what he or she would like to save for. If they want something big right in that moment, the parent should say no and tell them to either save up for it, or put it on a holiday/birthday wish list. However, if your child insists on buying a toy you see as silly or of poor quality, allow them to buy it. When the toy breaks or your child quickly loses interest, this will be a self-taught lesson to not buy trivial things.