You are never too young to learn how to start managing your money. In fact, according to some research, you might even want your kids to start as early as five years old.
Stacker looked at the research for how much of a difference saving early could make, and even just putting away a dollar a day every day can add up tremendously over a lifetime.
Obviously, young children are probably only getting their money through an allowance. To teach them the value of money, you can encourage them not to spend all of it and instead put aside a dollar for each day of the month.
That’s typically only $30 per, and then $365 per year. But to a 5-year-old, that sounds like a fortune.
Stacker talks about how you can incentivize this kind of behavior by playing the role of the bank and giving them interest in their savings. Being willing to give your child that experience now will make them realize the importance of saving as they get older.
After your child has shown they are capable of this for several years, they will have a couple of thousand dollars. At this juncture, you could consider opening their savings account for real to trust them with a bit more responsibility. It will also make them prepared for making deposits if they have a job as a teenager.
Just using this simple strategy of continuing to put a dollar away each day and gaining interest on the overall savings, your child could already have over $8,000 saved by the time they turn 18. If that doesn’t sound impressive, by the time they turn 100, that number will have increased to over $7 million.
Fred Hubler, Chief Wealth Strategist for Creative Capital Wealth Management Group suggests parents start small. “If you can put away 10% of income,” says Hubler, “it becomes a habit that really makes a difference over a long period of time.”
Hubler likes to look at spending using the following ratios. 70/20/10. 70% is what you “live on” and 20% goes to pay down debt. The last 10%, which he states you should do first, is to save. He also recommends an app he uses for his ten-year-old twins called Greenlight. Greenlight gives his kids an allowance, do chores, and teaches them how to save and invest.
If you turn teaching your child to save into something fun and rewarding, they will be glad to do it. And when they have a solid retirement fund built up later in life, they will be glad you taught them well.
For a more thorough breakdown of the savings at each age, read the article Stacker published here.
Want to know if you’re on the right path financially? CCWMG’S Second Opinion Service (SOS) is a no-obligation review with one of Creative Capital Wealth Management Group‘s Wealth Strategists.
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