Retirement Budgeting Cash Flow Education Financial Literacy

It’s Never Too Early to Start Managing Your Money for Long-Term Gain

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As soon as children start earning money—from an allowance, babysitting, mowing lawns, etc., they can start practicing good money management.  

Even very small children can understand the concept of “Spend Some, Save Some, Give Some.”

If they get $10.00 per week for allowance, they should get into the habit of spending $5, saving $3 and giving $2 to charity. This is the 50/30/20 Rule, a fundamental principle of smart cash flow management. 

Model the Habit of Saving

Another rule of financial planning is the Rule of 72. When your children start saving money, they need to take a long-term perspective in order to watch the money grow. 

If they save $100 dollars in 2022 and earn 10% interest, even if they never save another penny, by 2029, they will have approximately $200. In 2036, they will have $400, and in 2043, they will have $800. Their money doubles every 7.2 years. 

Now suppose they are able to put $100 away every year. You can see with the compounding of interest, they will have quite a nest egg by the time they want to make a major purchase after college.

The best way to teach your children this practice is to do it yourself! Show them how money you set aside years ago has grown, or if you have not yet started, start today and show them in a year how much more you have!

Suggest a Roth IRA

A Roth IRA is a good vehicle for people who have $6,000 or less to invest each year. With a Roth, you pay taxes on the income up front, but after five years, your gains are not taxed when you pull money out. 

In 2022, an individual could save up to $7,000 in a Roth IRA. That is $6,000 if below age 50 and another $1,000 if 50 or older.


Children as young as five years old can learn financial literacy by reading books and singing songs, such as those published by Sammy Rabbit. Your children can find age-appropriate resources at their school or community library and online. 

If their school or university offers a financial planning course, encourage them to take it!

Again, this is an area where parents can model behaviors they want their children to emulate. Let them see you reading financial literacy books, looking at blogs on the subject, talking with your financial planner.   

Earn and Set Goals 

Do you have financial goals? Have you been saving for a special trip, a child’s wedding or a home remodel? Talk to your children about these goals and how they can set financial goals of their own. 

Once they start earning money, they are ready to set and act on their own goals. 

Having income, however little, gets young people in the habit of earning. It teaches them discipline (they have to show up at their job to get paid) and responsibility (deciding what to do with their earnings).

Appropriate financial goals for children and teens include:

  • Going to college
  • Buying a used car
  • Making a down payment on a house
  • Starting a business in the future
  • Taking a dream vacation after graduation

Goals make the process of putting aside part of every paycheck more fun. It is easier to stick with a commitment when you have a concrete goal.  

Delayed gratification is a wonderful lesson to teach your children. 

Avoid Temptation 

Why do so many lottery winners and professional athletes end up broke? Because they let themselves be tempted to spend inappropriately by influencers and people who take advantage of them. 

Mass media is constantly telling us we will be happier if we buy the gadget. Teach your children to set their own priorities and spend accordingly. 

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This content is developed from sources believed to be providing accurate information, and provided by Kelly Financial Planning. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.