The lessons of money management can never begin soon enough, and childhood is a great time to start. You can teach your children the right and the wrong way to manage money using concepts they already understand. It can be a fun for both of you and can start them off early on developing sound financial habits that will follow them for the rest of their lives.
Many banks offer easy to understand savings programs targeted to children and teens which will help them learn sound principles in money management. These programs are entertaining and teeming with incentives to make young people want to learn how to handle their money early on. Banks do this because they understand it's in their best interest to train young people to become credit worthy adults later on when opening up accounts in their financial institutions.
These programs for young people go by various names, like a Savings Safari. They work by encouraging young people to set certain financial goals in their accounts, and when that is done, these children win certificates which they can redeem for cash or prizes. Some programs also reward young people with stamps for every deposit made into an account, and these stamps can be exchanged for prizes later on. As they learn these skills early on, these young people can be trusted to open their own checking account when they are of age.
You can use checking and savings accounts to begin an early education and introduction to the full range of money management options available to the consumers today and a broader understanding of our financial system. This can begin with an easy introduction to how the banks work in concert with the Federal Reserve System and how to use other money instruments and tools such as debit cards, certificates of deposit, ATM machines, investments and simple accounting principles.
After having developed a clear understanding of proper money management through savings, begin by opening up a checking account so that your young person can develop hands on experience. They can save their weekly allowance and make regular deposits at various intervals, watching their money grow over time and gaining an understanding of how interest rates work. To open up a checking account for your child you will usually have to cosign for them, and the minimum allowable age is 16. At this age your teenager is already experiencing the wonderful benefits money can confer; he or she may even be employed on a part time or full time basis. They can begin managing their own money using these accounts until they are 18, at which time they can remove you as a signatory to the account and have complete ownership. Hopefully in that two year interval they will have learned enough money lessons to make wise decisions with their finances.
After the fun part of opening the account and choosing the best check designs from an array of options, it will be time to begin the hard work of helping your child balance their checkbook. This is where accounting comes in. Show them how to properly read a bank statement and learn how to reconcile how much they think is in their account with what is actually there. It should be an eye-opening experience, to say the least.
Paper checks might seem somewhat passé in this age of electronic money transfers and you may be tempted to skip over this important phase of your education. However, stick with it. If your young person cannot properly reconcile their finances on paper it's unlikely they will manage digital transactions any better. There is something about physically writing amounts down on paper that gives you a clearer grasp of how much money is going in and how much is going out. Encourage them to use checks to buy things they would normally pay for in cash, such as books, clothes, etc. They will learn the value of a budget and will live within their means. It will also be easier for them to save for college when they see it all on paper, in plain black and white.
Begin now to teach your young person proper money management skills. It really is never too early to start. You will teach them basic common sense along them way, and help them build a good credit history for the rest of their life.
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