Start Early
Handling money is something your kids are going to have to do inevitably, so instead of keeping them from its harsh realities, it is best to start teaching them how to approach it. Not only should you cover its importance but teach them that at the end of the day, it is also not the only thing that matters. It is important for kids to learn that they should be driven to earn money not to just hoard it, but to use it to better their life’s experiences and even those around them.
It is a great idea to get a piggy bank for them to understand what savings is. Instead of unconditionally buying everything for them, teach them the importance of earning. Discussing these topics will also allow you to help them understand the importance of working and dedicating life to master a trade – whatever that may be.
This may also be the time to teach kids the importance of charity and the role money plays in it – you never know, you may just help create an empath in the process and world could certainly use more of them today.
Take them Grocery/Family Shopping
Budgeting is a phenomenon even the savviest of the adults fail to understand – in a world where instant gratification rules the mind, such is understandable. However, taking them for simple grocery runs can allow you to teach them the difference between needs and wants and how to prioritize them properly. Apart from learning about how to spend money, they will also understand the concepts of basic measurement units and their purpose in sales. Parents can also use this time to teach their kids about the importance of eating healthy; think about all the money they will save on medical bills by making healthy choices once they are adults!
Discuss Allowance
Many parents might hate the idea of giving their kids allowances, but if you guide them correctly, allowances can be the best training wheels for them. To begin, you can get them involved in performing basic house chores in order to earn allowances – bonuses for getting good grades is also advised as it may encourage them to apply more towards their studies. It is best to make their allowances a bi-weekly event so they can learn not to spend it altogether at once.
You may not like this part, but you must allow them to spend their money how they see fit – it is there money and they will get better at spending it as the time goes by. There are limitations to this of course; obviously you must step in if they’re spending the money on drugs or to pursue other illegal activities. The key is to discuss their decisions with kindness and guide them accordingly – not scolding them in the times they deter.
Open a Bank Account
Young kids must understand bank lingo as early as possible; it is sad to learn that even college students are unsure of how to balance a checkbook. They must learn about all the basic terms; savings, checking, Certificate of Deposit (CD), credit, interest, debt, and overdraft fees to name a few. You must also teach them how to read and understand bank statements – and the importance of keeping track of their purchases.
Teach Them about Debt
Off all things your children should get familiarized with, debt is of utmost importance. Considering most people today take out at least 3 major loans (3 being: education, auto, and mortgage), debt is something that is going to be a part of their life and it is best if they dealt with it with confidence.
Having a credit card at a young age will help provide them with some training – you should dedicate the first initial months monitoring their activities and helping them stay on track. They must learn about the importance of paying on time and utilizing credit un-impulsively.
Don’t Play Rescuer
Your kids are bound to make mistakes throughout the journey and will immediately look to you for answers. While it is encouraged you take their problems seriously, we highly suggest that you never bail them out of problems.
For example, if they spend their allowances right away and require money for something else, then do not give in and reimburse them for their mistake; this in fact, may be a good time to practice playing bank – you can help them by giving out a loan, which of course they will have to return with interest.
The bottom line is that your kids should feel comfortable enough to approach you for advice regarding their finance troubles but not expect you to be the answer to the problem.
Lead by Example
Most kids take after their parents – this includes your financial behavior also. You cannot expect them to be proper with their money if the person that is giving them all these valuable lessons don’t personally follow them.
The way to do this is by involving them in your financial activities. For example, before you help get them a credit card of their own, show them how you use yours. Show them that the money that you make took years of hard work, perseverance, right choices, patience, and perhaps even struggle (if that is true of course) – but also that having money doesn’t exempt you from not behaving with humility to those who aren’t so lucky.
“Do not educate your child to be rich. Educate him to be happy, so that when they grows up they know the value of things, not the price.” – Unknown
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