Raising Money-Smart Kids- Part Two

Paul Brown |

Our job as parents is to prepare our kids to “launch” — to step into adult life ready for the challenges and opportunities ahead. Since finances play such a major role in building a stable future, one of the most important lessons we can give our children is how to manage money wisely. 

In part one of our post series, we focused on building a strong financial foundation through saving and spending. In part two, we’re going to take it a step further with a focus on teaching kids the value of investing and growing their savings. 

Part 2: Investing and Growing

  • Exponential growth- Albert Einstein famously called compounding interest the eighth wonder of the world. Kids can understand this when you make it tangible.

    • Young children: Use pennies or candy and double them over the course of a week to show how “interest” adds up over time.
    • Pre-teens: Try a savings jar where you add 10% “interest” each week they keep money in it.
    • Teens: open a high yield savings account together and review the monthly statement to see real-world growth.

     

  • Matching Contributions- Most employer sponsored plans include a company match to encourage savings and investment for the future. You can model this at home.
    • Younger children and pre-teens: offer to “match” savings from allowance or money set aside from birthdays or holidays.

    • Teens with a job: open a custodial Roth IRA and “match” what they contribute up to a certain amount.

       

  • Hustle & entrepreneurship- Not every child will have the same drive, but all can benefit from seeing the link between effort, creativity and reward:
    • Help them set-up a lemonade stand, sell homemade crafts, or rake a neighbor’s leaves to earn money.
    • Model and remind them how hard work and ingenuity can create opportunities- and income.

The lessons kids will learn is that hard work, mindful saving and investing, and delayed gratification can pay off in a big way. A great reminder for adults too!

👉 In the next post of this series, we’ll look at teaching kids the concept of Credit and Debt — another important step in raising financially savvy adults.