Published April 05, 2012
When Ellen Cannon was 10, her father bought her stock in General Motors. At 12, she accompanied him on a business trip and visited the New York Stock Exchange. These experiences fascinated her -- and years later proved useful as she sought a career.
Today, Cannon is a financial journalist in Palm Beach Gardens, Flor., and she credits those early events as helping her gain the knowledge needed to pursue jobs reporting on the finance sector.
"I felt confident," said Cannon. "Felt like I could talk the language."
Cannon's father wasn't a finance professional, but his guidance helped his daughter get a head start on achieving financial literacy. Regardless of your occupation or income, it is vital to teach your children the skills needed to be financially successful as adults, and sharing these seven experiences with them may help:
1. Opening a bank account
Starting a bank account can be a great first step to learning about money. Kids in elementary or middle school can open savings accounts, and adding a checking account may be appropriate for teens with jobs.
However, don't go into a bank or credit union and do all of the work for them. Let your kids handle whatever paperwork they can and answer the questions from the banker. Then, when the statement arrives, take the time to teach them how to read it and reconcile their balances so they get a clear sense of how successful account management works.
2. Drafting a budget
Perhaps no skill is more important when it comes to financial success than the ability to create and follow a budget. Teach your kids to intelligently spend the money they have and plan for future expenses by crafting a written budget with them.
Although some parents balk at the idea, allowing children to sit in on your household budgeting and bill-paying sessions can also give them a helpful real-world experience. If you have a teen with a job, make it a priority to help them identify their financial goals and create an appropriate budget.
3. Buying a gift with their own money
When budgeting with a child, don't forget to have them set aside money for holidays and birthdays. Letting them make their own gift purchases with their own money is both empowering and enlightening. It offers the satisfaction of sharing some of their wealth with a loved one, along with the practical experience of learning how extras such as sales tax, shipping fees and other expenses can turn that $20 present into a $30 present.
4. Donating to a charity
Likewise, foster a generous spirit in your children by encouraging them to share a portion of their money with a worthy charity or cause. You can help them find and evaluate charities on sites such as Charity Navigator. Making a donation is also an excellent segue into a discussion on taxes and how charitable donations may enable deductions.
5. Visiting a financial institution
As Cannon's experience demonstrates, getting a behind-the-scenes peek at the finance industry can spark an interest that lasts a lifetime.
"Being in the stock exchange building itself was very exciting," said Cannon. "The floor was littered with paper like confetti, and it was so fascinating to see how everyone was working."
Unfortunately, since the terrorist attacks of 2001, the New York Stock Exchange has closed off public access to the building. However, heading to the financial district of New York or another large city can give children a glimpse into the industry, even if it is at street level.
For those living in small towns, check with your bank or credit union to see if they can accommodate a tour to help your kids understand what happens after they pass their money to the teller.
6. Following an investment
Chances are, your children's retirements will hinge on money they've saved in a 401(k) or IRA, so help them become savvy about stocks and mutual funds from a young age. You could buy them a few stocks like Cannon's dad did or -- if you really want to dig into this task -- let them research and buy stocks on their own.
If the thought of your child buying stocks seems overwhelming or too risky, you can opt to research and select a fund to follow without any money actually changing hands. Simply choose some stocks for your "portfolio" and watch the stock market reports online to see how your "investment" is paying off.
7. Making a plan for college
As a financial journalist, Cannon says it surprises her how much is written about college planning that doesn't actually include children in the process. Instead of making plans for your children's future without their help, work with them to evaluate savings accounts and college investment plans and then track how those accounts grow over time.
Then, as they get older, they can more accurately estimate their education costs and expected sources of income to determine whether their savings are on target.
A lasting value
There are many reasons to share experiences like these with your children. But perhaps the most important is that it shows your children that money is something worth learning about.
"People shouldn't be afraid of finance," said Cannon. "And don't think 'I am not interested in that.' You have to be interested in that."
Teaching your kids how to be financially savvy could lead to a career in finance, or it could simply mean they will be able to live comfortably within their means. Either way, your kids win.
The original article can be found at SavingsAccounts.com:
7 financial experiences to share with your kids