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From Piggy Banks to Investment Portfolios: Helping Young People Achieve Long-Term Financial Goals

Jul 8, 2023 | ENTREPRENEURS

As parents, we want our children to grow up with a strong sense of financial fitness and money mindset. We know that teaching kids about money at an early age can set them up for success later in life. But where do you start? And how do you make sure your child is developing healthy financial habits?

In this blog post, we’ll explore the importance of teaching financial fitness and money mindset skills to kids and teens. We’ll cover everything from saving early and often to investing basics for young people. Let’s get started!

Introduction to Financial Fitness and Money Mindset for Kids and Teens

The first step in teaching financial fitness and money mindset skills to kids and teens is to introduce them to basic concepts like budgeting, saving, and spending wisely. You can start by giving your child an allowance and encouraging them to save a portion of it each week. This will help them develop good savings habits early on.

You can also use games and activities to teach kids about money. For example, you could play store or restaurant with your child and give them fake money to practice making change and handling transactions. Or you could create a pretend stock market game using different types of candy as “stocks” to teach kids about investing.

The Importance of Saving Early and Often

One of the most important lessons you can teach your child about money is the power of compound interest. By starting to save early and often, your child can build wealth over time and achieve long-term financial goals. To illustrate this point, consider the following example:

If a 10-year-old saves $5 per month and earns a 7% annual return, they would have saved nearly $23,000 by the time they turn 65. On the other hand, if they wait until they are 30 years old to start saving, they would need to save almost twice as much ($9.84 per day) to reach the same goal.

Developing a Healthy Relationship with Money

Another key aspect of financial fitness and money mindset is helping kids develop a healthy relationship with money. This means teaching them to avoid debt whenever possible, to live within their means, and to be generous with their resources. One way to encourage these behaviors is to model them yourself. For example, you might talk openly about your own finances and share tips for living frugally.

Investment Basics for Young People

Once your child has mastered the basics of budgeting and saving, you may want to introduce them to investing. There are many ways to do this, depending on your child’s age and interests. For example, you could buy shares of stock in companies that your child is familiar with (like Disney or Nike), or you could invest in mutual funds or exchange-traded funds (ETFs).

To simplify things, you could use online tools like Robinhood or Acorns, which offer low-cost options for buying and selling stocks and ETFs. Just remember to keep it simple and focus on long-term growth rather than short-term gains.

Encouraging Entrepreneurship in Children and Teens

Finally, one great way to teach kids about money is to encourage entrepreneurship. Whether it’s running a lemonade stand or starting an online business, there are plenty of opportunities for kids to learn valuable business skills while earning extra income. Encourage your child to think creatively about ways to generate revenue and support their ideas with guidance and advice.

Conclusion

Teaching financial fitness and money mindset skills to kids and teens can be challenging, but it’s well worth the effort. By introducing your child to basic concepts like budgeting and saving, helping them develop a healthy relationship with money, and encouraging entrepreneurship, you can set them up for lifelong financial success.

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