With today's paltry interest rates, will it not be hard for a child to see his money grow, even if he looks at a physical or online statement from a bank?

With today's interest rates near zero, it may be difficult for your child to see his money grow quickly by looking at monthly savings account statements. However, the Internet has various online calculators, such as moneychimp.com, that allows you to enter an amount in a savings account, as well as an interest rate, and the amount of time that the money is in the account, to see how his savings account may grow because of compounding interest.

How do we make children's savings goals easier to understand?

Experts in child financial literacy believe that, in order to teach children to save, parents should give them easily attainable savings goals, such as saving specifically to buy a toy, game, music, or a computer application. One expert at Kiplinger.com suggests showing a child a photograph of the desired item to make the savings goal more tangible. As a child grows, it is important to show him bank statements, so he can begin to see how his money grows in a savings account. Finally, it is essential to let the child spend the money he has saved, so he can start the process over again.

After a child has mastered the concept of saving to meet financial goals, what else can I do to educate my child on the value of investing?

The AICPA also suggests that parents should teach children the basic concept of risk compared with reward—that in order to achieve higher returns on your money, you may have to tolerate considerably more risk.

What does the American Institute of Certified Public Accountants (AICPA) feel is the most important step that parents should take to help their children to understand investing?

The AICPA recommends that before you try to explain complex concepts such as options and short selling, you should first teach children to understand the concept of

Why is hands-on training important to teach investing concepts to young children?

By giving children age-appropriate, hands-on training, letting children play with real companies and real money, a child can choose companies or investments that interest him, and follow the price movements of these investments, so he can put the concepts to work in practice. The more your child practices investing, the easier it will be for him to incorporate these concepts in later life.

making money grow by understanding short- and long-term financial goals, using examples a child can understand. You can achieve this by giving a child a goal, such as saving for a new game. If your child needs to save for something that is more expensive, then you can teach him why investing in other choices, such as equities or mutual funds, may help him achieve this goal.

As my child grows, how can I encourage him to continue to learn about money, finances, and investing?

Encourage your child to get a job, whether babysitting, cutting lawns, or working in a restaurant. Encourage him to have some goals in mind for what he wishes to save, and show interest in his pursuit, always encouraging him, no matter how small his success. Success breeds more success when it comes to creating wealth, and it begins at a very young age.

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