Teaching Kids About Money

When I was about 9, I remember my parents opened a savings account for me. And when I got cash from relatives, I would go to the bank and deposit it. The good thing is they taught me the importance of saving money. But the problem is, I don't think I was taught on how to spend it. I pretty much learned about investing and taking risks from personal experience. So I intend to make sure to teach my daughter about money throughout her childhood.

Today I found this article about 12 ways to Make your Kids Financially Savvy. The author has 2 children, and he shares about what he's doing to teach the kids about handling money.

I hope to teach my kid about handling money, from savings accounts, delayed gratification, saving for a goal, making calculated risks, using credit, and more.

My daughter is very young right now, but she is a good student. I tell her that we need to save money for future goals, such as vacations, disneyland, and college. I also tell her that mom and dad works hard to get paid. Then we have money to spend. So she seems to understand this and I look forward to teaching her more as she matures.

I know some friends who have credit card problems. They have 2 kids and a dog. And they have gone into serious credit card debt twice. They have expensive cell phone plans ($100/month), have the latest Razr phones, has a cleaning lady come in regularly, and wants to buy the most expensive $300 Christmas photo package at the mall. No wonder they are paying hundreds of dollars in credit card interest. Are all these purchases needed?

So how do I save? I try to save money by using a low cost prepaid cell phone from Virgin Mobile ($20 minimum for every 90 days), I take photos myself and get Christmas photo cards from winkflash.com ($25 for 75 photo cards), and we clean our house ourselves. So the end result is we have drastically different situations. I'm not being smug, but I do things to save money. But the money we saved has enabled us to have more options in life, such as going to Hawaii last year, and to enjoy life. We're not perfect, my wife and I go over our budget and we have decided to spend less eating out, and cook more meals.

I want my daughter to be able to manage her money wisely. Because I have seen firsthand the problems stemming from misuse of money.

Lessons for My Daughter on SAVING

When I was very young, my parents opened a savings account for me at a nearby bank. I guess I was taught early to save. Now that I'm an adult, I know that just putting money in the bank is not enough because inflation is going to eat away the earning power of your money.

As a parent, I hope to teach my daughter how to handle her money well. We're the adults now. So we've started talking to her about money. Of course make sure you explain things appropriate to their intellect. For example, I tell my 4 year old daughter that we can't buy everything she wants in the toy store. We tell her we have to save money for the next trip to see Mickey at Disney. She's beginning to think about money at an early age.

Saving money in a bank is not enough because most big banks just give really puny interest rate -- around 1% or less. It's crazy!! Don't be a sucker- make your money work harder. Savings accounts are good for parking your money that you need very soon. If you need the money within 1 year, keep it in a savings account. 2 years? yes. Don't risk money you cannot afford to lose.

Need the money 3, 4, or 5 years away? Let's think about that.

Instead of just a POSA, plain-old-savings-account, you should at least look into opening an account at a reputable online bank. These online banks offer much higher rates, almost 5%. That's because the online banks have few employees, no pensions, and no leases to pay. So they pass the savings to you. ING Direct is one bank to park your savings into. Avoid POSA's.