1) Be a Role Model
The way parents spend money and the way children view money has a significant correlation. Consider discussing the family’s financial goals and plans with the children. How much you share is to your discretion, but include the younger generation in at least a portion of the monthly management. How parents deal with money issues, from the monthly bills to planning family vacations can be important in teaching the children money management and the value of money.
2) Encourage Savings and Investments
To encourage children to save money is one of the simplest ways to encourage a responsible attitude about money. This could include designating a portion of a child’s allowance to a saving account, or making gifts of cash directly to an account in their name. Parents can discuss the account statements with the children and introduce the concept “ paying yourself first”.
3) Develop a Sense of Financial Empowerment
It is important that parents develop responsible spending habits by well thought-out choices. In order to guide and direct rather than dictate the savings and spending. Take children on window-shopping trips to compare prices and products and adopt the mind set that every trip to a store is an exercise leading to a potential purchase. For example, consider limiting impulse buying by implementing a rule that prices and products are compared at a minimum of three locations.
4) Give Unto Others
Involve children in the financial decisions regarding philanthropy. By helping children contribute time or money to a charitable cause, it can teach them that money is important in ways others than personal consumption.
Reference: Matthew P. Bartolomei, Financial Advisor http://www.fa.smithbarney.com/mattbartolomei/index.htm