|
Teach Your Children to Be Savers |
|
|
|
by Reprinted with permission of Investment Representative Celine Richardson of EdwardJones
|
|
Friday, 09 November 2007 |
 Ideally, our children should learn good behavior from us. But
when it comes to living within our means, and saving and investing
for the future, we're not setting such a good example. Consider
the following:
- Savings are low - The personal savings rate in the U.S. in
2006 and 2005 was negative - something that hasn't happened
since the Great Depression. Thus far in 2007, the savings rate
has crept into positive territory, but it's still anemic.
- Debt is high - Household debt, as measured by the ratio of
debt payments to disposable personal income, has reached record
highs over the past couple of years. Of course, your children
aren't responsible for our discouraging savings and debt trends.
But if you'd like to help them boost their chances for achieving
financial stability in their adult lives, you can take a number
of steps, including the following:
- Reward children for saving. Children, like adults, tend to
repeat behavior that is rewarded in some way. So, if you want
your children to become good savers, you might want to match
their contributions, either fully or partially, whenever they
put money away, whether it's in a big jar or a bank account.
Once they've saved a certain amount, you may want to let them
withdraw part of it to purchase something they want.
- Exhibit restraint in spending. When you want to teach your
children an important lesson, what you do is sometimes more
important than what you say. So, if you want to stress the importance
of delaying immediate gratification and avoiding excessive debts,
you might want to talk about something like your car, if it's
older, and say you wish you could get a new one. When your child
asks why you don't, you can respond that you don't have the
money for it now, and you don't want to have borrow too much
money to get one, because that would just mean a big payment
later on.
- Explain principles of investing. Even fairly young children
can typically understand what it means to invest in stocks,
if it's carefully explained to them. Use examples of the companies
with which they may be familiar - Disney, McDonald's, etc. -
and stick to the basics. For example, anyone can own small pieces
of these businesses. You might even decide to buy a few shares
of one of these stocks and, along with your children, follow
its returns.
- Give examples of inflation. If you want your children to become
financially literate, they'll need to understand the effects
of inflation. Start them out with simple examples, such as the
cost of candy or milk when you were a child versus those costs
today. Then, explain that as the cost of virtually everything
goes up over time, you need to put some of your money in investments
that will hopefully have the potential to grow faster than the
rate of inflation.
By following these basic suggestions, you can help your children
develop financial behaviors that can serve them well throughout
their lives.
----
v3i43
|
Archive Business & Technology 
