In the current economy, we need to ensure that our children are financially literate. Parents should teach their children the fundamentals of handling money. But where do you start? Perhaps begin with the following benchmarks of financial literacy.
* Saving money vs. incurring debt
Children should be shown the benefits of saving money, watching it grow, and patiently deferring purchases until a future time. When children grow a little older, they can learn the reverse lesson: how debt today results in accumulated interest costs down the road. Also, there are some types of debt that are better than other, i.e., mortgage vs. credit card debt.
* Checks, debit/credit cards and online banking
In today’s cashless society, your children will someday need to know how to write a check, use a debit or credit card, and how to bank online. When they are ready, consider setting aside a morning to take them to the bank, introduce them to a representative, and set up their first checking account and bank card under the tutelage of the banker. Children will appreciate this rite of passage to adulthood, and they will learn how to navigate an ATM or bank website the right way, not just the way you do it.
* Reconciling and tracking expenses
Knowing how to reconcile a checkbook and track where they spend their money is a valuable life skill. Many banks allow the account holder to add categories to the transactions online to help track spending. Developing a system for safely storing receipts, warranties, and other valuable papers is also important.
* My parents always said…
Like any other area of life, you will naturally want to pass down truisms that have guided you financially. Succinct phrases often suit this purpose quite effectively, such as, “keep a little gas in the tank, a little money in the bank.” Or, “don’t place all your eggs in one basket.” Sound corny? Perhaps. But such sayings today might just remind your children of something important tomorrow.
* Charity
Consider including your children in the charity selection process. Teach them why certain causes are important to you and how you determine the amount to give. Perhaps you could give your children gifting discretion over a small sum of charitable dollars.
* Ask the accountant
The day will eventually come when your children will be ready to talk investments, retirement, and taxes. Feeling intimidated yet? There is no need to fear. Our firm can assist you and your children with these advanced topics. Being financially literate is not child’s play. But then again, neither is being a parent.
The IRS announced that more than $1 billion in tax refunds for the year 2008 remain unclaimed by a million taxpayers who failed to file a return for that year. The tax law provides a three-year period for claiming a refund when no return is filed. That means these individuals must file a tax return for 2008 no later than Tuesday, April 17, 2012, or their refunds will be lost.