by America Saves
14. June 2010 12:49
Editor’s Note: Encouraging savings for youth is an important mission for the America Saves campaign. The following e-Wealth Coach article is one grandfather’s personal experience in teaching his children and grandchildren about finances. We hope it will provide a starting point for dialogue between you and the youth in your life when discussing saving.
The long-term key to improving America’s overall financial literacy quotient is to get to the kids. What’s important is to establish good financial behaviors early because those behaviors will carry over to adulthood. As a father of four and grandfather of nine, I’ve seen it work firsthand. Start early, insist on consistency in behaviors, and set a good example. Monitor your saver’s progress and celebrate the successes. With that mantra, here’s what how to get started:
- When kids can walk, it’s time to start saving. Establish the first behavior of saving by teaching your child to drop coins in a piggy bank or a jar. Explain the meaning of the word save.
- Show the money. Periodically, show the child that consistent saving adds up by regularly tallying up your savings.
- If there is an allowance, it’s time to budget by putting savings first. No matter what the size of the allowance is, break it down between what they can spend, and what they have to save. Note: this may be your first financial “negotiation” with your child – start with saving 50%, and settle for 25%.
- The first large purchase. As your child ages, he or she will inevitably want to spend their entire savings – on one item. The answer is “no.” Modify budget into more line items – discretionary spending, mandatory saving, and “saving for the large item.” This is where the behavior of “buying within means” is established.
- “But, I want it now…” This may be the time to deve lop a new financial concept – borrowing money. That’s okay as long as the rules are set, and the “borrower” adheres to them. This is where the behavior of “borrowing within means” is established.
- “Can I have a credit card?” Response: No, it’s too early. We’re sticking to the plan above. However, let me teach you about credit cards – after the “eye roll,” stick to your game plan.
- “My friends have credit and debit cards.” Response: I’m happy for them. We’re sticking to our financial plan, and here’s why.
In my own experience, my children were grateful for instilling financial responsibility at a young age. Start early, consistency, monitor progress, and celebrate success – I’m convinced that’s the formula for increasing America’s financial literacy quotient many times over. Get to the kids.
Proud Grandfather,
Carl George
Carl George is the Senior Executive Partner at Clifton Gunderson LLP, a national CPA firm; past Chairman of the National CPA Financial Literacy Commission of the AICPA, www.360financialliteracy.org and www.feedthepig.org; and the proud grandfather of 9.
