Since 2008, the American public has added $100 billion dollars in student debt to the economy. And consumer debt is at the highest level it has ever been: According to an article on Bloomberg.com, consumer debt has reached the $3.2 trillion mark. So what does this have to do with helping your kids become smarter about money? Just this. Kids who are not taught good money management skills often grow up to be adults with debt and financial problems. If you’d like to help your kids avoid that eventuality, here are seven things you can do to teach them how to take care of heir money.
In This Post:
1. Financial Education Starts at Home
Schools are not teaching our kids how to take care of their money. While it used to be that classes in personal finance used to be required, less than 20 states now require kids to take these classes. But the financially savvy parent can pick up some of the slack by teaching kids how to take care of the money they earn.
2. Pay Your Kids Allowance
Speaking of earning money… You might want to pay your kids an allowance. True enough, this topic is hotly debated among parents. Some believe that kids shouldn’t earn money for helping around the house when they live there.
However, if you pay your kids allowance, you have the opportunity to teach them important lessons in financial literacy. After all, if they never earn any money, they’ll never learn to take care of it in the way they’ll be expected to as adults.
3. Teach Them to Prioritize
Once your kids have earned some money, they should also learn the power of the word, “No.” There is benefit in doing this, according to an article on TIME. Financial smart kids learn that if they spend the money they earn today on candy or a night at the movies, they may not have the money they need to buy a bike in the future. Kids who can’t prioritize how they use their money will speand it without thinking about where their money is going.
4. Take Advantage of Teachable Moments
An article on Parenting.com tells parents to talk to their kids about the financial choices that they, as parents, must make. For example, if you take your kids grocery shopping with you, get cash from the ATM to pay for the groceries.
Let your kids see how each of your dollars are spent and how you decide which items to buy and which to leave on the shelves based on the cash you have. Using cash shows them in a very obvious way that when the money is gone, it’s gone.
5. Help Them Open a Savings Account
Part of learning how to take care of money is learning how financial institutions work. Helping your kids open a savings account teaches them how to start using these financial services. When your kids are old enough, take them down to your local bank or credit union and open an account. Then teach them to keep track of their money online.
6. Encourage Them to Get Little Jobs
While it’s good to pay your kids an allowance, it’s also good to encourage them to get side jobs to earn some extra money. While kids are young, they can do things like mow lawns for the neighbors or babysit. As they get older, they can serve coffee at the local coffeehouse or walk dogs after school. Doing this teaches them that they can access the money they need.
Too many kids grow up hearing their parents tell them, “I can’t get that for you: I can’t afford it.” But you don’t need to afford it. Teach them how to go out and earn money so that they themselves can buy what they want.
7. Allow Them to Make Mistakes
Very often, when a kid makes mistakes with money, a parent will step in and make the situation right. But this is a mistake. Kids need to learn that their financial mistakes have consequences. For example, if your kids insist that they want a cheap MP3 player now (in lieu of saving for a more costly one), let them buy it. Chances are the item in question will break very quickly and have no warranty. It’s better that they make small financial mistakes now than get caught up in big financial mistakes later on in life.
Final Thought on Financial Literacy
Teaching your kids about money counts among the most important things you can do for them. Nowadays, they won’t learn financial management skills in school. However, they must learn them from somewhere if they are going to avoid making costly financial mistakes in their adult life. By teaching your kids these seven financial tips, you are helping them to create greater financial literacy now and better financial management skills for their adult lives.