Gifts That Teach Kids Financial Responsibility

Teaching your children about money and finance from an early age is an extremely important and beneficial lesson for your children. If a child (when I use the word child, I am generally referring to a person between the ages of 12-17 and not a toddler or infant, because neither a toddler nor an infant or any child under the age of 12 could really understand such lessons) can learn how to appropriately use credit, use a bank, and save and invest money, the child would be in a far better financial position when he/she enters the "real world" than many other people of like age.

However, many can agree that it can be hard to teach a child anything. Teaching is even harder when the topic involves money because up until that point, you (the parent) have always been the bank, the tax collector, and the ATM. However, you can teach your children about money by way of gifts that are protected. In other words, for example, you could open up a stock account in your child's name and as a gift, contribute a certain amount of money to the account. The lesson is created and learned when you make the gift conditional.

For example, if you decide to go the stock account route, you can, as one of your child's gifts on birthdays and holidays, contribute money to that account. However, before you donate the money, you child has to pick the stock into which to invest the money. If your child knows nothing about the stock market or how to read financial information, this will be an exercise in futility. However, this is where you come in. You have to teach your children how to read financial information and how to read stock quotes.

At first, you will probably want to restrict your child's choices to big, safe companies that deliver consistent returns. However, as your child becomes more educated on the subject, you can open up the available investment field to include more speculative stocks. As this occurs, the child will get a first hand experience as to the principle of risk vs. reward.

As all of this is happening, you have to be constantly teaching your child to appreciate money. This does not mean that you teach your child to be greedy or to worship money, so to speak. Put simply, people generally do not respect what is not theirs. As such, unless your child appreciates the money in the stock account, he/she may blow the money once he/she gets his/her hands on it. It is important to note that maturity usually comes with age and therefore, you may want to restrict your child's access to the account until they reach a certain age (for example, 25 years of age). By this time, your child will be a working adult and will have a first hand experience of what it takes to earn an honest dollar.

Teach your children when they are young and they will most likely avoid the common financial mistakes that many young adults make. As such, they will be better off financially and intellectually.