A few days ago I wrote about starting to teach children about money when they’re very small. The important lesson is to delay satisfaction. By not getting everything the child wants when the child wants it, the child learns the value of savings and eventually earning combined with saving. The lesson should carry over later in life and increase the child’s financial good health. Elmo helps to give the lesson a visual so children will better understand.
Elmo may be able to help toddlers and preschoolers understand how to save a dollar for something special instead of spending it on less worthwhile things now. What lessons should older children learn to help ensure that they will be financially literate when they really need it?
Employee Matching Plan
This is the best free money around. If your employer offers to match any amount that you put into a 401(k), take it. No matter what the percentage is, it’s money you didn’t have to do anything to get.
Interest rates are not that great today. Interest rates may be better very soon. When you save your money in an interest bearing account it earns interest. When you leave it alone, the interest is earning interest as well. The sooner you start saving, the sooner your money will grow.
When you’re looking to grow your savings, you don’t want all your money in low yield savings accounts. Don’t put all your funds in one stock either. Spread the risk throughout many companies or funds.
When you contribute to your 401(k) the money is typically withdrawn before your tax liability is applied. Make your money work for you to get the most from it.
Understanding how the cost of living affects your income and outgo is vital to preparing for the future.