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The most important way to teach your children properly about making investments is to set a good example. To practice what you preach instills confidence and security in the way others see you.

As a child I always had a savings account. The rule I made up for myself which worked for me, was any time I received any money as a gift or otherwise, I would deposit half of the amount into my savings account. This would allow me spending money and also build up my savings.

Very rarely was I allowed to purchase things in stores without using my own money. If I wanted to buy something and I had no money to pay for it, the item had to meet the approval of my parents. I had to discuss the purchase with them and tell them why in my opinion this was a sound purchase. More often than not I was allowed to buy the item. This seems like a good idea because it made me evaluate each purchase I made to make sure I was spending the money wisely.

Whenever I wanted to purchase a larger item, I would make a list on paper of the pros and cons of buying the item. This made me realistically see how my money was being spent. I was allowed to dip into my savings account on rare occasions. I would shop around to locate the best price on the item I was intending to buy. After all the research and making sure I still wanted to purchase the item, I was allowed to withdraw the money for the purchase from my bank account.

When it came time for me to go to college I had enough money saved up that I could pay half of my college costs. My dad matched the other half by taking out a loan. Going to college was something I really wanted to do.

To me this is a sound plan. It allows a child to evaluate the purchase before making it, and it was always allows saved money in a bank account.

Learn more about this author, Kathy H.
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