When credit card offers start arriving in your childs mail, they can become an easy remedy for being broke and this will lead to even more money mismanagement and even credit problems or worse, bankruptcy! Teaching your children about money doesn’t have to be a hard lesson though and if you get to them while they are young, it will be easy and fun for them and you will be setting up good habits to carry them through for life.
There are a number of ways to begin teaching money management so they don’t have troubles in the future.
Introduce them to money itself! Help them with homework math problems and get them used to the idea of counting money, quarters, pennies, dimes, dollars and so on. Have then do simple math like adding and subtracting and so on. As they get older you can add more complicated math problems and issues such as understanding how to calculate interest from credit cards, the first type of credit they are likely to get.
Teach by being an example! This can be harder on us than our children, but it is worth it. Your children will learn about money management easier when you learn the lessons you are teaching! You children won’t believe a word you say if you don’t have good money management skills yourself, so learn all YOU can about credit, budgeting, investing, saving and avoiding or reducing frivolous debts.
Give them an allowance! Yes, that means your going to have to give them some money yourself, even if it is only a dollar or two a week. let them make their own decisions about what to do with it. Some say a dollar for every year of age is realistic in our current times. If you have a 10 year old, give them 10 dollars per week or month depending on your own budget. If they are never given any money, they will never learn how to manage it! Hopefully they will have learned from you by the knowledge they have received how to spend it or even if they want or need to. Whether they blow it on the first want or decide to save it, they will be better money managers when they become adults.
Teach them one thing at a time! Don’t overwhelm them with all types of responsible money management at once or you will lost them in the process. Children are not often great managers of much at a young age and if you let them fall once in a while, this can be the best lesson of all! The more experience they have with money, the better skilled they will become in managing it. If they so choose to blow it as soon as they get it, then this will teach them about patience and saving for what they really want and avoid impulse buying. You are also setting up the foundation for investing at this time, but this can be brought into the picture later when they are older.
Teach them about credit and credit cards! Human beings are impatient creatures and we want things now even if we don’t have the money for them! Credit cards have become the staple of modern families which often goes into impulse as well as necessity buying leading to out of control credit card debt as well as other types of debt. Using credit wisely can open the door to better financing options when buying a home or car and this depends greatly on your credit score! Teaching your children that credit is a loan not a gift and that it has to be paid back, often with high interest rates, and that only when they develop a plan to pay it back, should they get a credit card.
Have family discussions about money! Talk to them about their money management. Encourage them to come to you with any concerns they have about money and setting up a time to discuss money keeps everyone on track. If they are younger, talk about checks and credit cards and when they are teenagers, talk about the effects on the economy, what inflation and deflation means or how to economise at home and finding other alternatives to spending money such as borrowing an item or renting it for a one time use purpose or even making this yourself!
Show them the importance of saving and don’t bail them out! Bailing out your children when they are in financial trouble can be the worst mistake of all. If they were saving and suddenly blew their savings and don’t have the money later for something important will teach a valuable lesson. It’s going to be a costly lesson, but learning that every decision has it’s consequences will never be forgotten and the next time they may choose differently! Teenagers will need money for car payments and insurance plus maintenance so they need to budget their money for those things. If they run out of money, it will hurt when they are on foot before they are paid again and you will how fast they figure this out! If they have to walk, ride their bike or take the bus to work, most likely they will be more careful with their money next time.
We all are aware of how money can be fun and if you teach your children while at a young age about how to handle money, you will set them up for ways to insure their financial future and help them make it the best it can be. Contact your bank and other financial institutions for educational information you can use to teach your children the responsibilities of money, including these articles and my websites!
Government publications can be useful too. Encourage them to open a bank account that best fits their age group and other account options that help them spend and save wisely. When they are ready, teach them the importance of having a credit card and a saving account so they will have resources for emergencies. It will not always be easy and the best lessons you can teach are the ones we often need ourselves, but raising children who understand money and using it wisely sets them up to achieve their share of the American Dream and these lessons can never be taken away!