Being a parent may be one of the most underappreciated undertakings in the world. Perhaps that's why, back in 1994, then-President Bill Clinton signed a resolution establishing National Parents' Day for “recognizing, uplifting, and supporting the role of parents in the rearing of children.” Most parents don't need the extra kudos, but it's important to recognize their daily love and devotion.
Training your children to be the best they can be, however, is a daunting task — especially when it comes to money. Every parent wants their child to be successful financially, but giving them the tools to make that happen isn't always easy. To help, here are four essential money tips that will help put your children on the path to being financial achievers.
1. Saving is key
If you want your children to find that pot of gold, teach them to save, because that's one of the big secrets to becoming wealthy. Start with something basic, like using a glass jar (instead of a piggy bank) to store any monetary gifts or cash earned from completing tasks. This way, your child can watch that money fill up the jar.
If your child is older, you can open a bank account, and they can watch their balance increase. Even an interest-bearing checking account will be adding cents (and hopefully dollars, depending on the balance). Your child will feel good having more money than they started with.
Don't forget to reward them for their success. Once the jar is full, they can spend a portion of it, but be sure to bank or invest the rest.
2. Be a goal-setting coach
Studies have shown that people who learn how to set goals are generally more successful in life, because it leads to higher motivation, tangible results, and greater satisfaction. Therefore, it's important for parents to create simple exercises so their child can practice goal-setting and experience those feelings.
Begin by discussing a goal your child would like to accomplish. Maybe it's learning to play the piano, participating on a sports team, or writing an article for the school newspaper. Or it can even be saving enough money to buy a new toy or video game. Then, help your child define the steps they will need to accomplish their goal, including a specific timeline.
Check in with your child every now and then to discuss the progress they're making. And don't forget to acknowledge those steps along the way.
3. Distinguish between wants and needs
Discipline creates the structure your child needs to attain their goals. One way to achieve that is by teaching them the difference between wants and needs. A “need” is something we require to survive such as shelter, food, and water. A “want” is something nice to have like a chocolate cake or the latest hot toy.
When your child “wants” something, they can request it as a gift for their birthday or during a holiday. If they want it sooner than that, they can save up for it (see No. 1 above) and purchase it on their own (two lessons in one — now that's awesome).
4. Make a game out of investing
Help them choose a stock they're familiar with. Companies like Walt Disney, Hasbro, or McDonald's are probably ones they know, so it's easier for them to understand how the businesses make money.
Designate some of their savings to purchase even one share of stock. Then, they can watch their investment grow. If they start early enough, by the time they're in high school, they may even have a portfolio large enough to put a dent in their college expenses.
The above four ideas will help your children develop the habits they need to become financially successful. And if you don't believe me, trust billionaire Warren Buffett who said, “My dad was my greatest inspiration. What I learned at an early age from him was to have the right habits early.” Your child may not become one of the top 10 richest Americans, but they can be financially secure — which is an achievement you can be proud of contributing to.
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