How to Teach Kids About Money

How to Teach Kids About MoneyYou can help teach your kids about money – and usher them into a life of financial success.  Knowing the basics of money management will help your child to plan ahead and achieve their life goals. You don’t have to start when your kids are in kindergarten, necessarily, or wait until they head out into college.  Rather, finding the time to integrate lessons ab0ut money at any stage is a good idea.

Sometimes, our first problem as parents is that we feel awkward talking to our kids about money.   Use these tips to make it easy to explain budgeting, shopping, saving, and using credit wisely.

Budget Smart

  1. Learn the basics of budgeting. Explain budgeting in simple terms as a plan for income and expenses. Discuss examples of trade-offs and the concept of needing to earn more or spend less in order to remain financially secure.
  2. Get familiar with ordinary household expenses. Give your child an early start on knowing the cost of typical goods and services. Let them see the cable TV bill and your monthly car payment. Compare to the price of the new hot toy or game they want and they’ll understand not to take Nickelodeon for granted.
  3. Monitor your spending. Ask your teen to keep track of their spending for a month or more. This can be on things they pay for themselves, or items you give them money for, like lunch.  You can even do this with them, as you track all your expenses for incidentals (cups of coffee, quick runs to the grocery store…etc) Your kids may be surprised by how much they really spend on eating out or clothing.
  4. Help them Manage an Income. As long as school remains the top priority, encourage your teen to have some income of their own to manage. You can provide an allowance or support their efforts to find a summer job.

Shop Carefully

  1. Shop in tandem. Go shopping together to demonstrate how to get the best value. Compare prices for generic and brand name products at the grocery store. Look for special sales at the local mall. Go online to find coupons or free shipping deals. 
  2. Research major purchases. Assign your teen some research when they want to make a major purchase such as a cell phone. Let them compare plans and help decide what features they really need.
  3. Study consumerism and  materialism. Advertising bombards people with messages to consume more.  Talk about why you shop and how you feel afterwards – does retail therapy really work. Take time to go through closets together for a garage sale or donation pile to really understand how much stuff we accumulate that we wind up not using. Discuss the importance of moderation and basing your happiness on sources other than your possessions.

Save More

  1. Establish goals. Help your kid to set short and long term goals that will motivate them to build up some savings. They may want to buy a bike or put away money for college.
  2. Understand interest. Provide an introduction to the power of compound interest. Your child may want to save more if they realize how much money they can earn by starting a savings account when they’re young.
  3. Develop a savings strategy. Help your teen find a plan that works for them. They may want to set aside a small percentage of their allowance or half the money they get for their birthday or babysitting jobs. If possible, you can provide an extra incentive by offering to match whatever amount they save.

 

Use Credit Wisely

  1. Select the right instrument for you. If you are going to allow your teen to have a credit card – for emergencies or while at school, there are many kinds of cards to choose from now so you can find the level of parental control that’s comfortable for you. Debit cards give you the peace of mind of enforcing a pre-established spending limit, and many cards give you the option to review all statements.
  2. Pay your balance off monthly. Let your teen know that interest works against them when borrowing. Show them how paying off a credit card balance each month protects you from paying much more than the original price for the goods and services you charged. If you’re brave enough you might want to pull out your own bills or discuss your own issues with credit.
  3. Know the significance of good credit. Talk with your teens about the importance of good credit. Explain how being responsible about paying off bills helps people to qualify for financing when they need student loans or want to buy a house.

     

    With a little information and guidance, you can teach your kids about money – and set them up for a lifetime free from financial stress and worry. Really – what better legacy is there than that?

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