Teach Children About Finances
Tips to Help Your Children Learn About Managing Money
Manging money is a crucial life lesson. Tips are provided for parents to teach their children how to manage their own personal finances before they become an adult.
If you look at the curriculum in many high schools across the United States, you would be shocked to learn the majority of high schools do not have classes that include lessons about managing personal finances. Isn’t this one of the most important subjects to teach children so they can grow up to be successful independent adults? Learning to manage finances is a crucial lesson that is often left solely to parents.
What is important for parents to understand is that financial training for children doesn’t involve only a few hours of instruction. Parents need to think of financial training as a lesson that is taught over a 14-year period in order for children to truly understand how to manage money and to understand financial responsibility. Here are some ways to help your children learn about managing finances early on so they can be successful managing their own finances as adults.
Give an Allowance
Beginning at age four or five, parents can begin to give their children an allowance for payment of certain age appropriate chores performed around the home. Before giving an allowance, parents need to set family guidelines regarding allowance spending and discuss these guidelines with their children prior to giving the allowance. The allowance should continue be provided until the child leaves home, as long as the age appropriate chores are completed. Throughout those years, parents need to teach children to save a portion of their allowance and to budget for specific items they may be interested in purchasing. Consider making a rule of saving 50 percent of the allowance and keeping 50 percent to spend on items in the future.
Part-time Job
As soon as children turn of age for a part time job (this may be only a few hours per week) consider having the child apply for a position. Consider babysitting, mowing lawns, delivering newspapers, washing cars, mother’s helper, etc. as great potential part-time positions to begin “employment”. Part-time jobs are a great opportunity to teach children about the importance of earning income. Again set guidelines ahead of time about the percentage of money they will save and the percentage of money they can afford to spend.
Save Money
As soon as children begin to accrue money, and this often begins the day they are born, open a bank account and begin putting money in the account. As soon as they are four or five years old they can accompany you to the bank and put money in their own account with your guidance. Once the account has reached $500.00, talk to your children about opening a CD and consider moving the money to a this type of higher interest account.
Also discuss investing in some stocks, such as Disney or any other interesting stocks children would like, and have them look at the newspaper each day or online to view the stocks performance. You could also consider a childhood IRA and have your children learn to save money in this form as well.
Get a Checking Account
As soon as children enter junior high, have them open a checking account with your guidance. This is a great opportunity for them to see how money comes in and how money goes out. Teach them how to balance a checkbook and keep updated on their account. Teach them how to pay specific bills using their checking account as well. Make sure they are completely responsible with the checking account before you consider providing an ATM for a child.
Get a Secured Credit Card
Once children enter high school, provide them with a secured credit card with money they have already saved. So many young adults go to college and open credit cards without understanding the implications of their purchases and nor do they understand how much they will have to spend paying off the credit cards that have finance charges attached. Teach your children early about the dangers of credit cards and teach them how to be responsible with credit cards early on. Make it a requirement that any purchases made with the secured credit card are paid off every month.
Lead By Example
Be financially responsible so your children have someone to look up to. Pay your bills on time and don’t spend money you don’t have. Include your children in discussions about major financial decisions such as a purchasing a new home and discuss openly the sacrifices the whole family will have to make when this occurs. This helps children understand what needs to happen to make major financial decisions and it will help them become more financially savvy as an adult.
Give to Charity
Each year explain to your children the different charities you give to and explain why. Explain the importance of your donation to the charity as well. Ask your children to set aside a small amount to give to their favorite charity. This teaches them about the importance of giving and it makes them feel good about giving some of their own hard earned money to a charity they believe in.
Lastly, enjoy teaching your children about managing personal finances and understand that your children will reap the benefits of your lessons for decades to come.
