There are thousands of books out there on how to save money for various purposes such as retirement, college and home purchases . Teaching your children about savings is a popular topic. But I ask you, is teaching kids about saving really enough? I agree, it’s important for everyone, particularly children, to learn about saving money . However, by emphasizing only the saving habit, you may actually be endangering your children’s future financial well-being.
These children will grow up to be adults, and will face con artists and evil people like Madoff, who will persistently exploit the “low interest rates on their savings accounts.” They lure them like the big bad wolf with rosy pictures of ridiculously high rates of return. We see adults, well disciplined in the art of saving money, getting trapped by these predators.
Say you are at a party and you hear someone talking about earning double-digit returns; They insist their investment is “guaranteed, safe, and extremely profitable.” So you start thinking “why not?” As a child, if you never learned about principles beyond saving, like the relationship between risk and return, you’l l be less likely to answer that question correctly.
So it can be dangerous to just emphasize savings, when teaching to children about money. Like Little Red Riding Hood in the timeless tale, we need to show them how to be skeptical and ask the relevant questions. In our current environment, it is becoming more important that children be given the necessary foundation to protect them from predatory financial practices when they grow up. We should teach them the skils and knowledge to think for themselves and not to rely on the advice of armchair experts, and smooth talking wolves.
Any financial curriculum for children should include a variety of topics. Concepts such as the relationship between risk and return, identity theft, how to spend wisely, and simple money management tools should be as important as teaching them to save money.
Yes, teach your kids to save, but don’t stop there. A little knowledge can be dangerous. Go beyond the current popular trend of teaching about savings like it’s a sweet grandma to be trusted, and give your kids the key financial tools to protect themselves in scary woods of finance. The big bad wolves of our world are not so easy to recognize.
Prakash Dheeriya, PhD is a father, author and a professor of finance. He has written a 20 volume series called Finance for Kidz which covers a wide spectrum of topics, including savings, risk and return, identity theft and budgeting. To contact him or find out more about his books visit http://www.finance4kidz.com
Tags: financial planning, money management for kids, banking, savings, retirement, budgeting, 401K, IRAs, accounts, children, allowances, smart, savvy, decisions
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