May 29

May 29 Michael Spears: Tips for teaching your children about money

Like many of you, I have had the opportunity to raise two children. At some point, when withdrawing money from the ATM or swiping your credit card, you will have to explain to your children that money does not grow on trees. Below are some tips to help your children understand that they cannot buy whatever they want without ever paying for it. Also, to help them learn how to handle their own money.

Dining out

Hopefully we all get to experience this sooner rather than later. How many times have you noticed that a beverage can run anywhere from $1 to $3 and become frustrated? One solution could be to explain to your children and grandchildren that they can choose the beverage, water, or the amount of money in cash the beverage would have cost. The beauty of this is that you are teaching them about money and also encouraging healthy habits.

Making the concept of visual

Most of us are visual learners and a great way to help children organize their finances is to explain that they should divide their money into four different buckets: one for spending, one for saving, one for investing and one for charity. They can share the concept of the compounding effect of growing their savings and investing the way Warren Buffett explained the concept, “Life is like a snowball. The important thing is finding wet snow and a really long hill.”

We have increased our children’s financial vocabulary to help them understand concepts such as what buying a stock means, investing, risk, and reward. To apply this new knowledge and maybe create a little sibling rivalry there are many apps out there that can-do virtual stock investing such as InvestingNote or StocksLive. Watching financial news and having discussions about the stocks that are selected would also be helpful.

A Time Long, Long Ago

You can involve older family members who can explain the envelope system where physical money was placed in an envelope and mailed to pay obligations. In most cases the first envelope was savings where the term “pay yourself first” came from. This would also be a good time for a senior family member to share what money was like when they were young and becoming established. While you are at it, ask him what a party line is?

The First Step

Once you start with the child’s level of investing knowledge, it’s time for them to get started. You can acquire a stock and have the physical certificate delivered which you can frame and put in the child’s account or use allowance money to purchase shares of stock through an app such as Busykid.

Past performance is not indicative of future results. Diversification does not assure a profit or protect against loss in declining markets. All indices are unmanaged, and investors cannot invest directly into an index. The S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks.

Michael E Spears is located at 2906 Hull Road, Kinston, NC 28504 and can be reached at 800.655.9487.

Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. Fixed insurance products and services offered through CES Insurance Agency.