Your Child's Financial Plan? It's Not too Early

Money is a very important part of life. Of course, it's not the all-encompassing, all-powerful obsession that some people worship and others fear. But, it is an essential element of the world in which we live. As such, we all should know how to exercise prudence and savvy in its use – whether it's for spending, saving or investing. Furthermore, those of us with children have a responsibility to teach them about the care and feeing of finances, as well. You can begin while they're still young simply by exposing them to the concepts of budgeting and balancing a checkbook whenever you sit down to do your own. In doing so, you'll be laying the educational groundwork of a successful financial plan for your children.

Once your kids reach the pre-or early-teen years, you can help them to open up savings account. In addition to the excitement they'll feel about actually being able to do business with a real-live bank, you'll be teaching them about the importance of saving for the future and also about the effects that interest can have on their money. Sit down with your child and show him or her how to compare banks in order to pick the best account, taking into consideration not only the interest rates paid by the institutions but also the fees that they charge. When the two of you have opened the account and made the first deposit, take some time to help your child set up his or her first budget. Don't neglect to explain every step of the way what it's for and how it's used.

A budget and savings account go hand-in-hand for your child's early financial planning. After all, in order to learn how to deal successfully with money, he or she is going to need to handle small amounts of it. If you don't already, you may want to consider giving a nominal allowance. But, if your child earns money by working a few hours part-time, that's even better. Make it a requirement that they put away a certain amount weekly into their savings. Give them some input into how much this will be, taking into account their needs for recreation, clothes, CDs or other expenses they may have. You might even choose to match their savings deposits dollar-for-dollar, but do so only on the stipulation that if they spend all of their budgeted money before month's end, they can't make a withdrawal from their savings account nor will you give them any additional amounts to spend. In this way, they'll soon realize that overspending is neither appropriate nor responsible, and it will force them to carefully reevaluate their spending behaviors. Furthermore, they'll have to check their budget periodically to make sure that they're not exceeding its limits.

While you're at it, take the time to teach your child how to shop wisely by comparing offerings from different merchants and vendors. Additionally, make the point that although budgets are to be followed, they can also be adjusted along the way to make to make them more easily and efficiently implemented. Some of the lessons that your child learns during this process may be a bit difficult, but they'll serve him or her well as they progress toward their own larger and farther-reaching financial plan.