If you want to raise financially savvy kids, consider leaving school behind and starting on a scholarship instead.
One of the most important things you can teach your child is the importance of saving, says Rose Palazzo, former head of financial planning at Morgan Stanley and now head of MoneyGuide at the consulting platform Envestnet. . For children, the lessons they learn through experience stick the longest.
Palazzo recommends that parents not only give their children pocket money, but also allow them to spend it on whatever they want. This helps them learn and practice the concept of goal setting.
“Help young kids understand the value of saving and how to balance their short-term needs with things that may be longer-term,” she told CNBC Make It.
She suggests showing kids how to set savings goals for “that special toy or event they want to go to” and achieve them by setting aside some of their pocket money.
“Putting money aside and then being able to buy this toy is something they go through,” Palazzo said. “In fact, it can be very important for children to put it into practice. »
Though she says there’s “no age” to teach kids about money, Palazzo recommends teaching savings start early. As they get into their teens, you can tackle more complex subjects by teaching them “some of the concepts surrounding investing and the power of compound interest.”
Building a solid financial foundation at a young age can pay off. Even legendary investor Warren Buffett attributes the first money lessons his parents taught him to his success.
Buffett has described himself as “fortunate” to have parents who taught him finance at Berkshire Hathaway when he was young. Annual Meeting 2014. “We learned it at the table before we knew what we were learning,” he said of financial education.
Buffett said he “gets letters every day from people who have committed some kind of financial or other insanity” but don’t realize what they’ve done is wrong because “their parents didn’t do it.”
“By digging the holes that financial illiteracy can cause, you can spend the rest of your money [life] do it,” he said.
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