Children today have a much different experience when it comes to money. Most of us grew up watching our parents working long hours and saving every penny to provide us with the “little extras” we treasured. Our parents paid in cash or wrote checks; rarely did you see a credit card being used to pay for items. These days, kids see a debit or credit card being used to pay for nearly everything and they don’t think twice. With so many adults sinking farther into debt each year, it becomes more important to teach our kids fiscal responsibility so they don’t end up in our debt soaked shoes.
Teaching Money Management
Start early!! It is never too early to teach your kids the fundamentals of good money management skills. Whether your kids earn an allowance or get paid for chores, begin to show them the importance of saving money. Make time to sit down with your kids and calculate a portion of their money that goes into the piggy bank each week or month. Have them get involved with you and your spouse when it comes to balancing the check book each month. Kids should be aware of how money works and have an idea of what it takes to run the household each month.
Set up an account. Open a checking and savings account at your bank when your kids reach the age they begin to desire purchasing larger items, such as clothing, music, electronics, gas etc. Now is the time to show them how to balance their own account register each month. The worst mistake a parent can make is not showing your kids about the consequences of overdrawing their account. People that do not follow their account balances often are at a greater risk for overdrawing their account. Make sure your kids understand how to keep up with credits and debits to their account. It is a good idea to start your child with cash and checks before moving them to debit card privileges. Once they display responsible spending and consistent account monitoring, you can introduce debit cards.
Begin to establish a credit history. Many youths do not ever have the opportunity to obtain a line of credit until they go to college. All too often this new found convenience gets out of control and young adults end up in debt before they graduate college. Unlike debit cards, credit cards possess interest rates and higher delinquency fees for overspending. Provide your teen your with a credit card as an “authorized user” on one of your accounts. By having their own card, they will be able to track their purchases separate from yours. By reviewing the monthly statements together, you can show them how quickly purchases can add up and how interest rates affect the balance. Once they reach legal age to obtain a credit card, help them find a low limit card with the lowest interest rate they can begin to use on their own to gain a positive credit history.