Turning children into young adults starts with healthy savings habits

Eric Hutchinson

Special to Valley News

As Jodi walked to class that day, the freshman noticed a large circle of booths spread out across the main courtyard of campus.

Scattered among the booths was one giving away free T-shirts with the school’s mascot on it. All Jodi had to do to get the free swag was fill out a form. As a bonus she would receive this little plastic card that was practically free money.

Or so she thought. Four years later, she was stuck with a $5,000 T-shirt thanks to the debt she rang up.

Children who learn the importance of saving money at a young age are much better prepared to manage their money independently once they are grown

Jodi’s parents never talked to her about debt. Or how she could have bought a similar T-shirt with cash, stashed away a matching amount in an emergency fund and been in the clear financially by the time she graduated. Instead she has joined the average college graduate in America who leaves school with more than $5,600 in credit card debt alone.

Children should begin to build an emergency fund as soon as they can, so they can have some money saved up and understand the principals of savings and creating an emergency account by the time they become young adults.

Here are seven ways to help your child develop a lifetime emergency fund.

First, encourage children to save something. Whether it be a 10-year-old stashing away a dollar or teenagers opening a savings or checking account, get children in the habit of saving no matter how small the amount.

Help children balance treats and sacrifices. Help your children by setting and meeting goals. Once those goals are met, allow them to withdraw a little to buy something they want.

Loose change goes to the emergency fund. Loose change can add up, so don’t let children discard those pennies or leave them lying in the parking lot – no matter if they are heads or tails up.

Set an example. Children don’t miss much, and if they don’t see you saving, they might wonder why they need to save.

Keep children away from credit as long as possible. Credit card companies have large marketing budgets, and much of those funds are spent on marketing to older teenagers. Make sure your teen understands what credit pitfalls could lie ahead.

Schedule money meetings with your child at regular intervals, so that you can discuss their emergency account, answer questions and discuss money issues they might encounter.

Help children set up a real budget. The earlier children learn to manage a budget, the easier things will be down the line. Younger children can start learning by jotting their plusses and minuses down on a piece of paper, while older children can be introduced to budgeting on software and apps.

Circumstances are always changing as people grow older. I would recommend going over each year’s changing needs with your children. The emergency fund has to adapt and be ready for whatever circumstances might pop up.

Eric Hutchinson is a certified financial planner with more than 30 years of experience in the areas of financial planning, investments, estate and tax planning. Hutchinson has professional affiliations with The Financial Planning Association, the Certified Financial Planner Board of Standards and the Investment Management Consultants Association. His new book, “The Financial Briefing,” distills time-tested wisdom based on decades of professional experience and provides an overview of many of the financial and life issues everyone will face at some point. For more information, visit www.erichutchinsonfinancial.com.

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