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A holiday gift for young ones that will last a lifetime

How young people can save

Would you be interested in giving your children or grandchildren a gift that helps them prosper for the rest of their lives -- unlike the usual toys and games given at Christmastime that are quickly forgotten? And would you be intrigued to learn that this gift might benefit you financially as well? 

Giving your young loved ones the gift of financial literacy and capability can deliver lifelong advantages. You can do that with holiday presents of one or two excellent books that will educate and motivate your children or grandchildren about the value of effectively managing their money.

"The Squirrel Manifesto," written by Ric and Jean Edelman and illustrated by Dave Zaboski, uses beautiful illustrations and fables to introduce children ages 4 to 8 to the value of saving for the future. "America has a financial literacy crisis, and one solution is to start educating children at young ages," advocates Ric Edelman, a prominent financial adviser who has written several financial planning books.

One innovative idea from Ric and Jean's book is to ask children to divide their allowances or money gifts into four groups: 

  1. Save for future spending
  2. Give to others in need
  3. Spend on yourself
  4. Pay "taxes"

Ric observes that a child will learn valuable lessons by thinking about how her money is deployed in each of these categories. While the value of the first three categories might be broadly understood and accepted, asking children to set aside money for taxes is a new idea.

According to Ric: "Paying taxes is part of being a responsible citizen, and children should learn at an early age that their taxes contribute to the greater good of society." The parent can accumulate the "taxes" the child pays and give it back to them at a milestone age, such as 16 or 18.

"The Squirrel Manifesto" includes a useful "Guide for Grown-Ups" at the back of the book, with ideas for parents to help their children form positive financial habits that will last the rest of their lives.   

"The Barefoot Investor for Families: The Only Kid's Money Guide You'll Ever Need," written by Scott Pape, is a valuable book that's chock full of practical ideas to help children of all ages effectively manage their money. While it's written for an Australian audience and occasionally introduces American readers to some colorful Aussie terms, the money management ideas are universal.

Here are just two great ones that can help introduce older children to important lessons about money:

  1. Teach an older child about sophisticated investing and money management concepts. Instead of giving them a fixed weekly or monthly allowance, give them stock shares or mutual fund shares that pay quarterly dividends that approximate the amount of the allowance. The dividends substitute for the allowance, and the principal remains untouched until a specified milestone age. This should motivate the child to see how the value of their shares and dividends change over time. They'll also need to allocate their spending to line up with quarterly payments. 
  2. Ask teenage children to plan, shop for and prepare a regular meal for the family. This teaches children that it takes money to feed the family, and it emphasizes the importance of not wasting food (and therefore wasting money), which in turn means they'll learn to be sensitive to the family's tastes.

While the book occasionally references Australian financial vehicles and products, it's easy to translate to American versions. For example, Pape suggests ways to encourage saving money in a "super" (short for "superannuation fund"), but if you substitute "IRA" or "401(k)," the lessons are the same. 

These books probably cost far less than an expensive electronic game or piece of clothing. But that's not all the benefit to the giver. If you read them with your children or grandchildren -- and enthusiastically participate in the recommended activities -- the lessons might just rub off on you.

Most older Americans know what they need to do to succeed in retirement: save more, spend less and get the most value for your money. The trouble is, many people don't get around to doing something about these challenges. When you're thinking about these concepts for your children and grandchildren, it just might boost your motivation to improve your own situation.

If you've already finished your holiday shopping, now you have some good ideas for birthday gifts in 2019. Give a gift that lasts for life -- for yourself and your loved ones.

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