Posted by TinyTotties on May 26 2011
Many parents struggle with determining how much money they should give to their children. It is important to help your children learn about good financial principles while they are still in your care, but whether or not you give them an allowance and how much you give is an individual decision. Only you can determine the best way to help your children learn about money. While deciding whether or not an allowance is needed is a personal decision, there are some important principles that every child needs to learn about money. Use these principles and your individual teaching style to determine if your kids need an allowance and how much is appropriate.
Principle 1: Money Brings Responsibility
Children need to learn that having money is a responsibility. Many children believe that when they grow up and are adults they will be able to buy anything they want. This of course isn’t true and helping your children to learn the connection between money and responsibility is important from an early age. One way to teach this principle is to give your child an allowance and then to expect them to purchase a few necessary items for themselves. For example a portion of your child’s allowance could be used towards purchasing new school clothes or shoes. As your child practices budgeting money for practical purchases they will realize that money isn’t just fun to spend.
Principle 2: Money Is Earned
You work hard for your money and your children should too. Help them to learn that money doesn’t just come freely but that it must be earned. You can teach this by discussing the family budget and what you do to earn a paycheck or by helping your child to earn money by completing simple, age appropriate tasks.
Principle 3: Know What You Have
Learning to budget and account for money is a skill that few children are ever taught, but it is still important. Help your child to create a budget and to account for money once it has been spent. If they have a savings account you can help them fill out a log of their deposits and withdrawls so they can always know what they have left. You can also teach this principle by establishing a family budget as large shopping trips and completed and showing your children where the money was spent.
These three principles will help you establish a family program for teaching your child about money. In many cases this will also include instituting an allowance for your child, but not always. Allowances can be powerful teaching tools, but aren’t the only way to teach your child about money.
Posted by TinyTotties on May 18 2011
College is expensive and each year it gets more expensive. If you want a college education to be an achievable possibility for your child’s future, you may want to start a college fund now. The sooner you start the less money that you will need to put aside each month and the more opportunity you will have to reach your savings goals.
If you want your child to go to college, a college fund is a very good idea. However, the amount you will need to save is a little more difficult to determine. Here are some principles that you can use as you set your monthly college savings goals.
How Long Do You Have?
Time is a critical factor for determining how much you need to save. If you have just started saving for your 16 year old child’s college you will need to save more than if you are saving for an infant. When you have longer to save you can also put money into riskier, more profitable investments since you will have time to compensate for any losses. For example if you know that you will need college money in a couple years you should put the money into relatively safe investments like savings accounts or CDs. On the other hand if you have 15 plus years before you will need the money you can invest in stocks, real estate and other more profitable markets.
What Kind of Education Are Planning?
The school that your child will attend will determine the amount of money that you need to save. For example a community college education will cost substantially less than a private 4 year school. Trade schools and other educational programs can also vary in cost greatly. To be sure that you save enough consider the type of education that you want to provide. Remember it is better to reach too high and save more than you will need than to come up short when it is time for your child to head off to school.
How Much Help Do You Want to Provide?
College expenses aren’t just limited to school enrollment fees and tuition. They can also include housing, books, food, transportation, entertainment and more. Some parents want to pay for the complete college experience while others prefer to simply cover tuition or housing. Another option that you can pursue is paying a percentage of college costs and having your child take out loans to cover the rest. If you know what you want to pay for, you can determine how much you will need.
How Many Children Do You Need to Help?
Saving for one child’s education is different than saving for several. If you have multiple children that you want to help through school you need to start saving for each child now. Figure out what you will need to save for each child so that you don’t run out of money after your first child heads off to school.