Bad habits are hard to break. But good habits tend to stick around for a long time.
That's why you will want to teach young children about the importance of saving and investing. It's almost never too early to start, and your efforts can provide a lifetime of benefits.
By the time most children reach age 5 they have more than enough cognitive skills to understand the basics of saving money. Of course, the older they get, the better equipped they will be to handle more sophisticated concepts of investing.
In any case, when your children are young, start them off on the right financial path by taking these steps:
* Set attainable goals. Kids will be more motivated to save money if they can see themselves achieving goals. That's why you don't want to burden them too soon by trying to get them to save for a long-term objective such as college.
Such a goal may well be appropriate, and even desirable, when children are a bit older, but when they are quite young, have them put money in a simple savings account for things like toys, video games, CDs, etc. By putting away money regularly and seeing how their efforts are rewarded, children will learn something about financial discipline and delayed gratification, and they're likely to be more appreciative of their possessions.
* Reward children's efforts. To help children learn to save and invest, you may want to offer a helping hand. Specifically, consider partially "matching" children's deposits into their savings accounts. If you were to put in a quarter or 50 cents for every dollar they deposit, their savings will have an opportunity to grow faster and they will feel they are getting "bonus" payments.
* Make investing fun. Try to get your children or grandchildren involved in picking and following a stock for fun.
So, if your children are interested in athletic shoes, for example, take a "research trip" to the nearest sporting goods store and study which shoes seem to be the most popular. Also, ask your children what types of shoes their friends are wearing. If your children are old enough, you may also want to go over annual reports and other financial information about the stock, but don't get too bogged down with numbers, especially if you see your child's eyes glaze over. Do, however, follow the stock's price and discuss the factors that may or may not be causing this price to rise or fall.
* Stress the long-term nature of investing. Stress that a stock is not the same as a bank account, and educate them to let them know this type of investment is not for impulse purchases or to meet short-term goals.
Instead, tell your children that stocks are for the long term. You might want to share with them some of your brokerage statements that show how many years you've owned some of your investments.
By following these suggestions, you can help your kids develop good savings and investment habits. Talk to them soon.
Cheri Lee is an investment representative with Edward Jones. Contact her at (561) 776-8988.