Teaching children to save, invest can pay off

If you're like many parents, you try to teach your kids important lessons such as etiquette, manners and a good education to prepare them for their adult lives.

But have you spent time teaching them about investing and saving? This may be one of the most important lessons for kids to learn as they prepare for life on their own.

Here are some ideas for teaching children about money from preschool through college:

5 to 10 years old

Parents may want to begin giving children this age an allowance. Many parents develop a chart with different chores around the house, and for every chore done the child gets a checkmark and a certain amount of money reflecting the number of checkmarks.

Encourage children this age to save their allowance in a piggybank. Explain to them that they could use their $2 this week on candy, but they could instead buy a toy if they save their money for a few weeks. This may be a good lesson in the power of saving and accumulating.

11 to 15

A child's allowance will most likely be much bigger at this age, so this would be a good time to open a savings account. Explain to the child the basics of saving and why he is opening an account.

You may want to encourage kids to deposit most of their Christmas or birthday money into the savings account, after spending a portion of it.

This may teach them that when they receive a chunk of money, they should think about saving for special things, such as social events or more extravagant wishes.

If you give your kids money to go to the movies with their friends, encourage them to use their allowance money to pay for extras, such as popcorn or candy.

16 to 20

At this point, children most likely will be driving and working part-time jobs to earn their money.

This may be a good time to buy them some shares of stock and explain how stocks work. Teach them where to find their stock quotes in the newspaper and check it with them regularly.

You may want to buy stocks of companies that your child knows perhaps companies whose products or services the child uses.

As children head to college, you may want to help them open checking accounts.

You can teach them how to balance their checkbooks, how to write checks and how to budget their money. For example, if you decide to give your children a set amount of money every month, teach them how to budget that amount so it lasts the entire month.

There are many different ways to help children understand the importance of saving, investing and budgeting. But the sooner they learn the basics of financial planning, the better prepared they will be for achieving financial success.

(Timothy M. Reese is vice president, Investments, A.G. Edwards & Sons Inc., Member SIPC.)