A new study by BMO Harris Bank shows most Wisconsin parents have or plan to open bank accounts for their children. An a majority, 56 percent, plans to open the account before their child turns five. The survey also found one in five will not open an account, compared to the national average of 26 percent.
“It’s encouraging to see that a strong majority of parents are thinking about the cornerstone of financial literacy – saving – and opening bank accounts for their children, with most doing so in the child’s first five years,” said Emilio Cooper, Regional President, Central Wisconsin, BMO Harris Bank. “Starting the financial education process from a young age can make all the difference. It can be as easy as discussing an allowance, explaining money-related decisions or teaching them investing 101.”
BMO Harris offers the following tips for parents and children on how to start to be a smart saver and investor from an early age through later teenage years:
The Early Years: The Value of Saving
· As soon as children start to collect a few coins and understand the value of money, open a savings account for them and explain how interest works.
· Focus on a specific goal (such as buying a video game or a bike), which can make it easier for kids to set aside the money.
· Suggest children save at least part of the cash they receive – for birthdays, holidays or jobs – for something they really want.
· This stage is also an opportunity to teach them about the importance of giving back. Explain to them how donations work, and find one or two organizations that tie into their specific interests. Instilling a sense of charity early on will help broaden their sense of the value of money.
Taking Action: Learn the Marketplace
· Talk about the concept of risk and the importance of having a balanced investment portfolio. Use language they understand and keep to key, simple concepts.
· Explain that purchasing a stock means they own a small piece of a company and the value of the stock can go up or down.
· Show them how to read stock prices online. If you have an online investing account, walk them through your portfolio and explain to them the rationale for your portfolio’s composition and any trades/changes you make.
Getting Real: Becoming an Investor
•Once the groundwork has been set, have kids invest a small sum of money in a few stocks they were previously tracking and perhaps offer to match any gains the child makes in their stock picks.
•Teach kids about the different savings and investing instruments available to them, such as 504 Plans and money market accounts for longer-term purchases.
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