 Allowances: Dollars and Sense
Feature:
Your Child's
First Investment
Some wise advice form parents from financial expert and
author, Paul W. Lermitte.
Start Small, Time is on your
Kid's Side
The term "Mutual Funds" is a common part of our language now.
This means of long term savings is a very effective one, and one that
we should be teaching our children.
A comprehensive description of teaching your kids about long term investing
is found in chapter 10, The Investment Crystal Ball of Allowances: Dollars
& Sense.
With the markets currently down, now is a great time to start your child
on an investment program. Financial planning dictates that you buy when
the funds are low, and keep your money in those funds for the long term.
In five to ten years, you will find that money has gown!
Here are some suggestions to get you started:
1. Help your child set
a long term goal toward something they want. This could be
a vacation, a car, a business, education or even a down payment for
a house. It's important that the goal be their own, because it will
give them incentive to save.
2. Explain the basic concepts
of mutual funds to your children.
I have found that they can understand how a mutual fund works, and that
if money is put into a mutual fund, usually more money can be made over
time than if it was put into a savings account at the bank.
3. Help your child to make
their initial contribution. As little as $100 can get them
started.
4. Encourage your child
to continue to set aside some long-term savings. When they
have saved another $50, it can go into their mutual fund account.
5. Review the quarterly
statements with your child. This helps them to see the activity
of the fund, as well as the long-term results. Discussion about market
fluctuation is also important.
6. Review your child's
investments with them annually, perhaps around their birthday.
Perhaps a meeting with your financial advisor would be helpful at this
point. They can help assess changes that may need to be made.
I hope these ideas will help you to get started on long term savings
with your children. Perhaps your own investment knowledge will grow
as well! Good luck!
To download forms that help your family get control of your
money habits click
here.
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