As parents, it is our responsibility to instill values and healthy habits in our kids. So why is it that few parents teach their kids about proper money management? The answer could be that we, ourselves, are not always the most savvy money managers. However, teaching kids about money doesn’t have to be hard, it could even be fun.
Practice Makes Perfect
Kids are in a unique position when it comes to finances, mainly because they have practice ground to learn without the consequences of going broke or damaging their credit. Before a kid is old enough to even apply for a credit card, they could be learning about how to use credit wisely, save for the future and budgeting.
Make it a family affair. Kids are more likely to be consistent when the whole household is doing it. Have everyone participate in setting financial goals, rules for making purchases and guidelines for saving. Have discussions about debt and why it is important. Post the family’s financial plan somewhere so everyone can see it easily.
Set up an exchange system. You can help your kids earn money and allow them to buy things with the money they earned. You can allow them to earn money for chores or grades, or you can simply give them an allowance each week with no stipulations. They can then use their money for items they wish to buy when they have saved enough, always remembering to leave a portion of their savings untouched.
Don’t be afraid of credit. For teenagers, it is especially important that they learn to balance a check book and use credit. Set up a joint account that you can monitor, and allow them to use a credit/debit card to make purchases. Chances are they may overdraw the account and be penalized an overdraft fee. This is actually a good experience, because it demonstrates a very natural consequence and reinforces the idea of tracking one’s spending.