Strategy no. 2
FIGHT THE SPEND TREND
Saving money, of course,
has always been a virtue. But for 21st-century kids like the Alperts,
who can no longer rely on company pensions and Social Security
to fund their old age, it is an absolute necessity. Yet the temptation
to spend, spend, spend has never been greater, with the average
child viewing at least 20,000 commercials a year and credit-card
issuers peddling plastic to consumers at ever-younger ages.
One
way to counter today's gotta-have-it-now mentality is to make
saving money a habit early on. Start with a traditional piggy
bank, preferably a see-through container. A kindergartner may
not be impressed by a bank balance statement, but he will intuitively
understand that a large pile of coins is better than a small one
and will get satisfaction from watching it grow. That's why New
York City media director Vladimir Leveque, 32, gave his son Amir,
5, an empty five-gallon watercooler bottle that the boy is filling
up with loose change that his dad brings home from work each night.
When the bottle is full, Leveque will use the money to fund Amir's
first savings account. "I'm introducing him to the ideology of
saving," Leveque says.
As your child grows older, give her money
of her own to manage (see "Making
Allowances" above). Then encourage her to regularly set some
of it aside for long-term goals, like a coveted toy or, for a
teenager, a cell phone. Help her plan how much she'll need to
save, over what time period and, as extra incentive, consider
matching a portion of what she socks away--an early introduction
to the 401(k) concept. Open a savings account for her at the bank
and suggest that she put some of her money there for safekeeping.
The idea: "Make it easy to save and hard to spend," says Robert
Manning, a finance professor at Rochester Institute of Technology.
Get the whole family involved in savings
efforts too, as opportunities arise. For instance, when their
three kids clamored for a pool in the backyard a few years ago,
Sheri and John Hart of Dayton spearheaded a "pool plan" to save
the necessary $3,500 for the aboveground model they wanted. Everyone
agreed to make sacrifices: The family ate fewer meals out; John,
46, general counsel for the University of Dayton, moonlighted
doing some extra legal work; Sheri, 43, postponed haircuts; the
kids contributed some birthday money. If one of them whined to
buy something on a shopping trip, "We just used the phrase 'pool
plan,'" says John, "and they would remember why this was a looking
trip and not a buying trip." When the pool was finally installed,
"there was a sense of pride and accomplishment," says John. "The
kids didn't miss what they gave up in order to achieve it." And
the lesson appears to be sticking. His son Jordan, 17, recently
used his own savings from afterschool and summer jobs to buy his
first car.
Strategy no. 3
HONE THEIR COMPETITIVE EDGE
The paternalistic, cradle-to-grave
employer is so 20th century. Kids of the new millennium can expect
to switch jobs several times in the course of a career, and perhaps
industries as well, as technologies change, companies seek to
keep costs down and global competition stiffens. While you can't
know which jobs will be in demand a generation from now, you can
count on workers with an enterprising and entrepreneurial bent
to have an edge. "We've got to prepare our children to be flexible
and self-sufficient to survive in an unpredictable job market
and a changing economy," says Bonnie Drew, an executive at YoungBiz,
which teaches business skills to young people.
Nurture your child's inner entrepreneur in
the grade school years by helping him find odd jobs to do, like
washing cars or raking yards. Encourage moneymaking projects such
as a used-toy sale or a lemonade stand. They provide an opportunity,
says Drew, to talk about various aspects of a business, including
how to market it and set a price that will turn a profit.
Be sure also to make your own work visible,
talking to your kids about your job, taking them with you to the
office occasionally and maybe even giving them a task or two to
do. Every couple of weeks or so, for example, Avon representative
Poonkulali "Lee" Suresh pays her children Sathesh, 10, and Sabrina,
6, a few dollars an hour to help her set up tables, stamp her
name on catalogues and sort out products. "This is the best way
for them to understand that money does not come easily and you
have to work for what you want," says Suresh, 38, who grew up
in Sri Lanka and immigrated to the U.S. with her husband Suresh
Kumaran, 42, six years ago.
Parents of teens with afterschool and summer
jobs can give their kids a huge leg up by helping them to invest
some of their earnings in a Roth IRA. Although it may seem ludicrously
premature to think about retirement savings for a teen, the power
of compounding over a half century or so makes the payoff huge:
A young worker who contributes $4,000 a year from ages 14 to 18
and lets it ride at 8% for the next 50 years will amass a nest
egg of more than $1.1 million, even if she never saves another
dime (see "Millionaires in the
Making," below).
Of course, you may discourage your child
from ever working again if you insist that she lock away all her
earnings for decades. A more practical approach, if you can afford
it: Ask your child to put some of her money into the Roth, and
fund the rest yourself, up to the total your child earned or the
current maximum of $4,000, whichever is less.
