Sometimes Teaching Kids About Money and Financial Responsibility seems like an uphill battle.. and it can be! But that doesn’t mean it’s not worth it.
You can better insure that your children enjoy a bright future by teaching them about financial responsibility, and this needs to start early. Knowing the basics of money management will help them learn to plan ahead and achieve their life goals.
You may not even know where to start but these steps can make it easy to explain budgeting, shopping, saving, and using credit wisely.
Learn to Budget Wisely
- The basic of budgeting. Explain budgeting in simple terms. It’s a plan for your income and your expenses. Then discuss the concept of needing to earn more or spend less in order to remain financially secure. We bought our young girls a piggy bank that has a save, spend, give and invest slot and also took out a bank account for them through a program at their school.
- Get familiar with ordinary household expenses. Of course you have to simplify this for young children but you can give them as well as your teen or tween an early start on knowing the cost of typical goods and services. Let older kids see the cable TV bill and your monthly car payment, talk to younger children about a small grocery trip, how much money you plan to spend and how much the items actually cost, let them pay for it at the cashier.
- Monitor your spending. Ask your teen or tween to keep track of their spending for a month. Your kids may be surprised by how much they really spend on eating out or clothing. Makes sure you go over the results with them and talk about how much was spend and any places in their budget they could spend less.
- Manage your income. Make sure your child has income of their own to manage. This could be an allowance or even a summer job or small side jobs like mowing the neighbor’s lawn.
- Shop together. You may or may not love shopping with your child (especially your teen, lol). But make sure to go shopping together to show them how to get the best value. Compare prices for generic and brand name products at the grocery store or scan the grocery ads for sales. If they “have” to have name brands teach them about places like Plato’s Closet or even eBay for discounted, used designer clothing. Also for special sales at the local mall.
- Research major purchases. Teens these days buy “large ticket” items. Make sure your teen does some research when they want to make a major purchase like a cell phone. Let them compare plans and help decide what features they really need. Talk to them about how they will pay for the item and possible monthly plan, and if they may have to give up other “luxury” items they typically enjoy to pay for it.
- Analyze materialism. Start talking about this early. Let them know that commercials are not more that attempts to make us spend more money.. not things we NEED most of the time. Commercials and other advertising bombard us with messages to buy more. Make sure to discuss the importance of moderation in our lives and finding happiness on sources other than the things your own. This is a great opportunity to introduce charity work to your child.
Learning to Save More
- Help them learn to establish goals. Help your child, even quite young children, to set short and long (how long will depend on their age) term goals that will motivate them to build up a little (or a lot) savings. Younger kids may want to by a toy, teens may want to save for a car or put away money for schooling.
- Start understanding interest. Provide an introduction to the power of interest by showing them an investing calculator. Your kids may want to save more if they realize how much money they can earn by starting a savings account when they’re young. Even my girls who are 7 and 8 found this interesting and exciting.
- Develop a savings strategy. Help your child develop a plan that works for them. They may want to set aside a certain percentage of their allowance or part of the money they get for their birthday or holidays. And for an extra incentive you might consider offer to match whatever amount they save.
Also read: Unique Summer (and Beyond) Jobs for Teens
Use Credit Wisely
Credit is not for everyone, but many people use it and once your child gets older they are going to be offered credit cards. So it’s good to help them understand it now, instead of waiting too long and they make mistakes they regret.
- Select the right credit options for you and your teen. 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 can give you the peace of mind of enforcing a pre-established spending limit, and many cards give you the option to review all of your child’s statements, so you can keep a close eye.
- Pay off the balance monthly. Let your teen or even younger child know that interest works against them when borrowing (just as it worked for them when saving). Show them how paying off a credit card balance each month protects you from paying much more than the original price for the products and services you charged, they need to understand that credit is not free money! This credit card payment calculator is great tool for letting your teen know why you should pay off your balance on a month basis.
- Understand significance of having good credit. Talk with your child about the importance of good credit. Make sure to explain how being responsible about paying off bills helps people to qualify for loans when they need to borrow money for school or want to buy a house or car someday.
- With a little good information and your guidance, your kids can master the basics of money management. It’s so important to encourage them to be responsible, by doing this you will help ensure your family’s financial security in the future and also help your child pursue their dreams into college and adulthood.
What have your strategies been so far when Teaching Kids About Money? What were your successes, how about mistakes you have learned from?
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