These days it is easy for kids to slip through the financial cracks and never learn the basics of smart money management. Between automatic payments and credit cards being the norm, most kids really never learn how to deposit money and balance a check book. With personal debt and bankruptcy filings hitting all time highs, it is more important than ever to teach kids to avoid our financial mistakes.
Setting Up For Success
When teaching kids and teenagers how to manage money you really can’t go wrong with starting with the basics, the basics of pen and paper bookkeeping. Start with simple deposits and debits, showing how to add money to their account balance and subtract any purchases. Although many kids may not seem interested in such a primitive approach, once they learn the basic rules you can easily upgrade them to a more technologically savvy method. Computer or web based spreadsheet programs offer great ways to help kids stay on track with their money tracking while offering checks for calculation errors.
Allow your kid to practice these methods with their very own account. As minors, you will be required to co-sign on the account anyway, giving you equal access and control over the account. It is important that kids learn to earn money and make trips to the bank for deposits, also having them adjust their financial records to reflect the changes. Teenagers should be allowed access to a debit card where they can make purchases, as well as ATM withdrawals. They need to experience just how quickly debits can get out of hand, draining their account if not carefully monitored.
Kids also need the experience of getting into debt and working their way out of it. In general, it wouldn’t be a bad idea to let your teen overdraw their account at least once and experience the pressure of having to pay additional fees to right the account. This will teach them responsibility and accountability for their money. Learning to take charge over their money is a skill that will be highly valuable, leading them to a financially successful future.