By Michele Barber, Northstar Bank
You’ve just won the Texas Lottery and you have two choices of how to receive your earnings: $1,000 an hour for 24 hours for 30 days or a penny doubled every day for 30 days. Which one to choose?
If you understand interest that compounds, you will discover that the first option will net you $720,000; while the 2nd option amounts to $5,368,709.12! The lesson learned is if you invest a little over time, you can end up with a lot if you choose saving and compounding interest.
Like many things, some are easier to do when you are young. So, how can we teach our youth about money to help them with their future finances?
Start a Savings Account
Many elementary and intermediate schools have banks that come weekly to the schools and collect the student’s money. Whether it is a zip lock bag of pennies and nickels or a check from Nana and Pop, it all starts to add up. If your school doesn’t have that program, your favorite financial institution can help you get started. The key is to save regularly. Teach the child that the bank helps his or her money grow better than keeping it in the piggy bank at home.
Learn About Income
It is important for our youth to understand money and how it works. You do something. Someone pays you for it. You put that money away, and then spend it on the things you need and want. Children can earn money by doing chores, having a lemonade stand, selling some of their toys at a garage sale, etc. Then that money, or a portion of that money, can be put into their savings account where they can watch it grow.
Learn to Balance a Checking Account
When our students are old enough to drive, they should learn about a checking account BEFORE they leave home and go off to college, or out on their own. Money that they need for school activities can be deposited into their account and paid out by them. They realize how much money you spend on them, while learning how to manage a checkbook at the same time. A win – win situation!
Start teaching your child or grandchild today. They will learn and have fun watching their coins and dollars grow!
