Raising children is a tough job. It is even harder to instill the right values. Teaching your children to be smart about money is one of the best life lessons you can give them. If they learn how to manage money early, they are less likely to fail financially later in life, which can be a problem when kids are in college or just starting out. If you help them learn smart money habits, it will help your kids (and you too). Here are some tips:
- Savings: Encourage your children to save money. Let them see how much things cost. Children may surprise you. If they see that an item they have been begging for is $30, they may actually decide the item is not worth it. If they do not have enough money to buy the item, do not buy it for them. It may be difficult to leave the store with a disappointed child, but it will help teach them to save. Encourage your children to save 10% for giving. Teaching your kids early on in their lives to give back to others will help them to continue this tradition later. Giving to others feels good and helps people to think outside themselves.
- Allowance: If your children can earn money for chores, it will instill good work ethic and allow them to actually have some spending money. If they don’t ever have money, then they won’t learn the importance of budgeting and saving. They may even find they want to do more chores to earn more – which is good for all parties involved. You don’t have to pay a large amount of money, but it’s nice for kids to know they will earn money for their hard work in the household. Don’t pay them for chores they don’t complete. You may get some arguments about why their sister is getting more allowance, but the behavior (or lack of) will not likely be repeated.
- Let Them Fail: Don’t be afraid to let your children fail. They may blow all their money at the first store they see at Disneyland, but then they will have to suffer through the rest of the day without any spending money. Teaching your child to budget is a great lesson to learn early in life. A younger child may need more guidance on how to budget (you may just have to say no), but by the age of 8-10, depending on the child, they can start to make better choices on their own.
- Set Good Examples: The best lesson, of course, comes from the parents. Talking to children about not putting yourself in debt to get something you can’t afford is a valuable lesson. We need to set good examples ourselves. Having an open conversation about not buying an item because you can’t afford it may go a long way later.
- No Credit Cards: Talk about the use of credit cards and how it is best to pay them off each month or use a debit card to avoid costly interest. Once a teen is in college, it’s best to give them a debit card - there are spending limits and it forces teens to budget. Using debit cards teaches them not to accumulate debt, which can be a significant problem with college kids. It’s best to have them start off in life with as little debt as possible. Many may actually have college loans to pay off and adding even more debt may be too much for them to handle, especially with the limited earnings they may have with their first job.
- Paying for Cars: Keeping in line with no debt, paying for cars in cash is best. This way, interest and car payments can be avoided. Even adults admit car payments can cause stress. The average car payment can run about $500 a month. If your child can save up and pay cash for a car, they will have more money to invest or save. Plus, if they actually save up that much money, it will give them a huge sense of accomplishment. Adults should set good examples and buy cars with cash too; however, all financial options must be considered. If we can get a loan with no or low interest rates, a loan may still be a good idea. Talk with your children about financial options -- the education will help put them on the path to a good financial future.
Source: Woman’s Day – April 2014