| Establishing good saving and spending habits in | | | | of an account's value on itself. You'll probably have |
| your kids at an early age may not be as difficult | | | | to go out several years for her to get the full |
| as you think. It will require a little due diligence on | | | | impact of this compounding. A great way to |
| your part but is well worth the effort in the long | | | | visually illustrate this is through a software |
| run. The following tips along with a running dialog | | | | program called KidsSave by Kidnexions. Included in |
| can help you jump-start your kids onto the road | | | | this virtual savings program is a section where |
| to financial security. | | | | kids can experiment with different savings |
| 1. Match their savings dollar for dollar...or quarter | | | | scenarios to see what happens to their account |
| for dollar. What better incentive for kids to save | | | | money over time. Kids get to see in graph form |
| their money than for them to know that for | | | | the curve that is made through compounding |
| every dollar they put away, it will be matched by | | | | interest which can be a very enlightening |
| a given amount. It's kind of like "free" money. | | | | experience...even for adults! |
| Okay, so it may not be free for you, but you're | | | | 4. Give them an allowance. An allowance is a |
| helping establish the habit of saving and, in the | | | | popular way to get money into the hands of kids. |
| long run, it will have been worth the extra money | | | | Most parents consider an allowance as an "earned |
| you had to put up. | | | | salary" for doing chores. But once you hand over |
| 2. Give them interest on their savings. This is | | | | the money, how do you keep kids from spending |
| another example of "free" money. And depending | | | | it all? Consider having your child save a portion of |
| on where the interest comes from, it may even | | | | it; the rest is theirs to spend. That way we get |
| be free to you. Opening a savings account at a | | | | our cake...the saving...and your child gets to eat a |
| bank or credit union will usually mean your child will | | | | slice of it...the spending. |
| receive interest/dividends on his balance each | | | | 5. Have your child set up a personal financial goal. |
| month. But keep in mind that this interest is | | | | Give your child a concrete reason to save. That |
| typically not a whole lot, especially for the kind of | | | | really cool pool toy that he just has to have. Help |
| balance a young child may have. And not many | | | | him create a plan to save the money to buy the |
| kids get excited about seeing 12 cents deposited | | | | item himself. Maybe you could match him dollar |
| in their account. So consider setting up your own | | | | for dollar. But whatever you do, start simple. |
| interest payment plan for your child's monthly | | | | Make sure the goal is easily attainable and make it |
| ending balance. Ten dollars earned on a balance of | | | | happen in a relatively short period of time. |
| $100 (10% interest) is a lot more appealing than | | | | Attaining success quickly will increase the chance |
| 10 cents earned. And you can vary the amount | | | | he will want to set up another goal, at which point |
| of interest you give as their balance grows. Which | | | | you can increase the time or the amount they |
| leads us to the next category... | | | | need to save. |
| 3. Illustrate the power of compound interest. | | | | And, of course, kids are notorious at watching |
| Show your child what can happen to her money | | | | what you do when you're not looking. If you |
| over time if she saves it and is earning interest | | | | model good saving and spending habits, chances |
| on it. This is called compound interest, the building | | | | are, your kids will probably do the same. |