Starting your kids off with a savings account is a good first step, but their money management shouldn’t end there. Kids’ financials are an important teaching tool for them. Money matters aren’t taught in school, so it is up to parents to give their kids a solid foundation of financial know-how to adequately prepare them for the future.
Kids’ financials can and should involve many different aspects. The same way that adults need to have a variety of investment strategies to meet their needs and goals, kids should also be taught numerous techniques for handling their funds.

Strategy #1: Make saving a habit
Start your kids off to a good financial future by always having them put at least 10% of their money away as savings. They can still have fun with the remaining 90%, but this will get them in the habit of saving for their future. Down the road, you can increase the amount they set aside for things such as saving for a rainy day fund (say to pay for repair costs on a bike or skateboard they damaged), a specific item they have their eye on, such as electronics, as well as charitable donations.

Strategy #2: Diversifying their portfolios
A savings account is the first and most basic step for kids’ financials. You can show your kids how they are earning more money by keeping it in a bank account, and why they should never draw it down entirely. Then, you can also have them put money into certificates of deposit and various bond issues. This will allow them to make more interest income on their money, while teaching them patience in having some money unavailable to them for periods of time. You can discuss the various options with them, and have them participate in making the choice of which route to go, such as choosing a longer term with higher interest, while accepting that their money won’t be able to be withdrawn without penalty.

kids financials - picture source: http://www.forbes.com/2008/10/30/savings-kids-money-pf-ii-in_et_1030youngmoney_inl_slide_2.html?partner=cbc

Once your kids reach anywhere from 9-12 years old, you can start educating them in the stock market. You may want to brush up on your own knowledge first. Many of the Brokerage and Investment Banking firms have online Universities where you can find information. There are many good books about investing available. The Government has many free publications that are avialable to you for no cost. Begin by using practice accounts. This keeps their money safe, while they are learning the ropes. You can try out different strategies to see the various outcomes.

Strategy #3: record-keeping
Just like you do for your own accounts and investments, your kids need to be shown how to keep detailed, organized, meticulous records of any and all transactions. The only way to properly assess how well they are doing is to have an informative record of what they did, and when, for tracking maturity dates, interest payments, fees, deposits, and withdrawals. This gives you a basis from which to discuss the success, or setbacks, they have experienced and to analyze where improvements can be made, or highlight what is working well. Having a diversified portfolio requires solid recordkeeping.

Strategy #4: Have fun and see that little rewards are given along the way
Investing needs to be taken seriously, but there should also be some lighter-hearted aspects to it. One way to do this is by playing boardgames or free online money-themed games. Those are great family activities that can put a fun, playful spin on money matters. You also want your kids to celebrate their achievements as they are getting positive returns on their investments, so finding small ways to reward this, that are free or low cost, but meaningful, helps them to feel good about what they are doing.
Knowing these strategies for taking care of kids’ financials means that your kids will stay well ahead of the curve in their money education. They will gain a greater understanding of, and appreciation for, how money is earned, how it can work for them, and how it can build safeguards for their future. Kids love to learn new skills that make them feel capable and knowledgeable, and parents can be excellent teachers and role models for them. Take ownership of your kids’ financial education and give them the tools they need to be resourceful, self-sufficient adults.