When it comes to money matters, what is considered sound financial advice for children to help them understand the value of a dollar and set them on a path to financial security? We turned to Judith Paulson, a certified financial planner in Bellingham, for some advice.
At what age should children begin to save?
Start early. At about age 4 a clear piggy bank can help children learn about coins, watch them accumulate and begin to learn about spending.
How much money per week or month would you advise a child to save?
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A common rule of thumb is 10 percent. When age and income (are) appropriate, provide guidance on such concepts as goal setting and saving for goals, discerning between needs and wants and expectations that your child contribute to their own expenses and budgeting.
Where is the best place to hold the savings?
A piggy bank is a great teaching tool and works well for short-term savings and spending. An interest bearing savings account at a bank or credit union better meets longer-term goals. Take your child to the bank; let them fill out the deposit slip and hand over the money.
What is the most important piece of advice you would give to parents in their effort to raise a money-smart child?
Work together to create guidelines for the financial lessons you want your child to learn as they grow and consistently follow it.
What is the biggest mistake parents make when it comes to money and children?
In my opinion, the biggest mistake is in not allowing a child to experience the consequences of their choices. Experience is the best teacher.
What did we miss that you think is important for parents and their children to know?
A few miscellaneous tips: Only promise what you can afford. Be willing to negotiate changes when called for. Have a set time of year for a raise. Encourage earning outside of the allowance. And most importantly, remember that the money habits you both teach and model will be the financial foundation your child will carry into adulthood.
Paulson offers securities and investment advisory services through Cetera Advisor Networks, LLC. Cetera is under separate ownership from any other named entity. Her office is located at 112 Ohio St., Suite 118, Bellingham.