Aug 31, 2021
#MoneyGoals. We want kids to understand that goal setting gets them from where they are now to where they want to be in the future. When they set and achieve goals when they’re young, they’re more ready to chart their own futures moving into adulthood. The same goes with money.
You may be familiar with the S.M.A.R.T. goal setting process — a well-known strategy for coming up with effective goals. It can be used for financial goals, too. After your kids read the story in their app, ask them to tell you their S.M.A.R.T. #MoneyGoals.
Here’s your quick review!
Once kids have a goal set, they should begin to narrow it down and think about the details of it. They’ll answer all the important questions like who, what, when and where.
Let’s say their goal is to help pay for their class trip to New York City. Specific would be "Save $10 of allowance each week for 25 weeks — to pay for $250 owed for class trip to NYC."
They should break the goal down into steps along the way. This makes it feel manageable and also helps them measure progress. If it’s measurable, they have a much better chance of getting from here to there.
Let’s use a car as an example, with their portion owed of $6,000.
If they want to reach that goal 3 years from now, let’s do quick math! $6,000/3 = $2,000 saved every year. We'll go with every three month increments to break that into smaller chunks to reach over time. Divide $2,000 by 4 to get $500 every milestone.
It’s one overall goal (their first set of keys!) but a series of successes that gets them there. It’s $500 each step of the way. That’s measurable.
The goal has to be realistic. It shouldn’t be too easy, but it shouldn’t be too hard, either.
It’s definitely not realistic for them to expect to save more than they’re earning. But what they can do is look at what they can change. Maybe it’s finding new ways to earn. Or thinking about what they want to achieve in the future, after getting their first job.
Key takeaway: Just because something may not seem possible now doesn’t mean they can’t take steps to make it happen in the long run.
Not only should their goal be important to them, but it also should be moving them toward their long-term vision. Just like with adults, kids should spend their money and their time on what means the most to them.
If it’s their dream to start building wealth while they’re young, maybe a car of their own in high school isn’t what they really want. If they didn’t contribute to their car savings but invested it instead, how could that money grow? At 8% interest over 10 years, $6,000 could grow to nearly $13,000 before taxes and inflation. That’s more than double!
When do they want to achieve their goal? They should set a deadline to help stay motivated and meet all the steps along the way.
Maybe they want to graduate from higher education without any student loan debt. Or take a year-long trip around the world before graduate school. Choosing the actual date for some day will help that day arrive.
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