Thursday, November 08, 2007

Personal Finance Lessons For Our Daughter

While our daughter is only three, she seems to understand some basics of saving money. When she was two, I gave her a coin sorting bank from my childhood. Although we put some starter coins in it, she really didn't have much interest initially. However, recently, she has been collecting loose change from around the house so that she can add it to her bank.

While I know that she doesn't fully understand the concept of money yet, I am thinking ahead to the first couple of financial lessons to teach, and how using her bank may help. Here are a couple of foundational financial principles that I think are important to learn early:

  1. Always spend less than one earns. This has been the foundation many a good wealth building strategy. Two good corollaries to this are: Buy only what one needs and Pay oneself first.

  2. Save, invest and benefit from the magic of compounding. Be patient. A dollar saved today can be worth a lot in 30 to 50 years. Treat building wealth as a marathon, not a sprint.

In the near future, I think I will use an allowance in combination with the bank to instill these principles. By having her put part of her allowance in the bank before any spending takes place, I think she can begin making these principles a habit.

For more on Crossing Generations , check back every Thursday for a new segment.

Photo Credit:, Michael Connors

This is not financial or parenting advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

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