Today’s economy is certainly challenging many of us, and is impacting the entire family more than you might suspect. Children are always watching what we do as parents, which is why it is important to think about the message you are sending to your kids at all times. While a bankruptcy may seem scary, it has the potential to teach your kid how to stand up in the face of hard times. Better yet, there are ways to help prepare kids for a financially sound future so that any unforeseen financial hardship doesn’t take them down a hard road.
Money management takes practice. It isn’t something that comes easily for most of us, and is something we all tend to need a little help with. When it comes to teaching kids money management skills, it takes a team effort. First, sit down with your kids and outline a budget for the family. Having kids involved in the family budget, spending and saving shows them the importance of keeping track of their money. Let kids participate in the process and even observe how financial transactions work.
The issue of credit use and debt is also an important early lesson. Most kids have no concept as to how a credit card works, which is why demonstrating the process is valuable. Children should learn the connection between using a credit card, the payment becoming part of the monthly budget and the need for income in the account to cover the payments. Depending on the age of the child, an explanation regarding how interest is calculated and its effect on the total amount repaid over time becomes important also.
You can also get creative and set up an exchange in the family of earning play money for chores, grades and the like. Kids can then practice saving money, budgeting and “paying” for things like special items or activities. It is never too early to put your child on the path to a financially healthy future.