If your kids are like most, they only understand one thing about money, they want more of it. Few parents take the time to teach their kids the basics on managing their finances and the true value of money. If you are looking to be different and set your child or children out on the right path, here are some things that you can do.
1. Open A Savings & Checking Account
Teach your kids how to deal with a checking account and the accompanying debit card right away. They may spend cash now but when they get older, they will be in the digital world where cash is becoming a rarity.
A checking account can teach them to track their expenses so that they can be responsible with the money they have. An overdraft fee or declined charge can be a strong lesson to learn. It will teach them to track their spending in the future to prevent the inconvenience and potential embarrassment.
When they get their monthly statement, sit down and go over their expenses. Show them how much money they are wasting on things like junk food and how small debits can really add up.
The savings account can also be a useful tool. It can teach your child how to save for larger expenses such as a video game system and eventually a car. They can also see interest at work and start to understand the benefit of investing.
2. Help Them Set A Budget
If your child is working with an allowance, help them write out a simple budget. Start with a weekly budget and then work up to a month. Have them write out what they will use their money for every week. They can use the money for whatever they like, but when it is gone, it is gone.
As they learn to master a weekly budget with their allowance, stretch out the time period. Start paying time every two weeks instead of every week and then just once a month. The longer they have to budget for, the harder it will be but having financial discipline is a great thing to teach them now. Just remember, no helping them out, when they are out of money it is gone. If you bail them out every time they need money, they won’t learn the lesson.
3. Teach Them About Credit
Open up a secured credit card in their name. If you have trouble finding one that will accept a minor, list them as an authorized user on one of your accounts, preferably one that you yourself do not use. In this way, they can be totally responsible for the debt on the card.
Allow them to make purchases on the card and see the negative effect of just making minimum payments.
Let your child see the dangers of credit card debt and fast money early and how to use them as a tool under the right circumstances. As a side benefit, your child can start earning credit early, something that can be a great benefit later.
4. Be A Good Example
Your children are watching everything that you do. Set a good example by demonstrating financial discipline. Don’t pay for everything with a credit card and don’t make a lot of impulse purchases. Your kids see this behavior and will repeat it.
5. Encourage Them To Get A Job
If they want to buy more than their allowance will provide, encourage them to get a part time job to get money. This is the best way to learn the real value of money and what it takes to get it. It will also introduce them to the wonderful world of taxes.
When they get their first check, walk through the deductions on it and show them where the money went. It will be an eye opener.
Now is also a good time to teach them that they should save a portion of their take home pay. Have them take 20 percent of each check and place it into savings. Saving should be considered normal and not something special.
Tina’s Final Word
Teaching your children how to be responsible with money is one of the best things that you can do for them. It sets them up for a lifetime of good money decisions and can allow them to reach more of their goals. Money is not everything but it sure is helpful.