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Total Views: 67Word Count: 493See All articles From Author Coins plunk into the little pink bank, which triggers the piggy to play the song "Twinkle, Twinkle, Little Star" to my daughter. She squeals with joy as the pennies drop to the bottom Gerard Gumbau Jersey , rewarding her with a tune. As she sways back and forth to the music, a smile spreads across her face. In the real world though, saving is tough because we are not instantly rewarded.
Patrick Sweeney, a financial advisor for a leading financial services company, took the time to talk with Connecting with Kids. He speaks from the dual perspectives of both a parent and a professional in the field about determining what to teach our children about money. Many parents begin with the piggy bank and focus on teaching their child to save in small ways. Teaching a child to save is a big deal. However Frank Bagnack Jersey , the bigger deal is teaching them the power of compounding interest. In a culture that craves immediate gratification, the ability to "hold off" and wait and make a decision based on a need versus a want has a tremendous financial reward.
Compounding Interest Say you won a million dollars in the lottery today and did not immediately spend any of those winnings to buy a car, take a fancy vacation, or buy a new house. The average interest generated in that first year would be a conservative 3 to 4%. By waiting just 12 months you could purchase a car, enjoy the vacation Edgar Ie Jersey , make a down payment on a house, or achieve a multitude of goals ... and not even touch the principal. You have now extended the life of your winnings because you have not depleted the principal. According to Einstein, the power of compounding interest is one of the greatest "forces in nature".
Investing Obviously, timing plays a critical role in investing. Depending on the length of time an investor has in relation to his goalobjective, the amount of risk an investor can afford to take Douglas Jersey , great or small, is quantified. Therefore, Pat's three-year-old daughter can afford to put more of her money into stocks because of a longer time horizon; her grandparents, however, need to have more of their investments in bonds because of their short time horizon.
Allowances If you Denis Suarez Jersey , as a parent, are deciding whether or not to offer an allowance in exchange for performing a chore, begin by defining what a "chore" is in your family. If it means that your kids keep their own room clean, wash the dishes, walk the dog Dani Alves Jersey , or clean their bathroom, monetary reward is not appropriate according to the expert in finances. Pat clarifies this by stating, "Rewarding a child for a behavior or expectation does not add up. These activities are put in place to help teach your children how to become self sufficient and work in a famil.