Being a parent requires you to teach your kids to be responsible. One thing that is often overlooked is teaching kids about money. Many parents make their finances into a secret thing rather than involving the whole family in the conversation. This can lead to a generation of children who have no clue what it means to have and use money wisely. Instead of avoiding money conversations with children, it's important for parents to make sure their kids understand money and the way credit works. Parents should even talk to kids about how to monitor credit scores so that they can track their own financial health in the future.
Introduce Money Early
In order to teach kids about money, you need to get money into their hands. Money should not be looked at as an abstract concept. Rather, parents should be sure to show kids exactly how to use it. This includes giving them an allowance, having them pay for some of their own needs, and showing them how to save. It's essential to set up a savings account for a child as soon as feasibly possible. Make a habit out of going to the bank and depositing money. Sit down with your kids and discuss how much money they have and what they plan to do with it. This practice shows them that money is a powerful thing and that you trust them to make their own decisions with it.
Teaching kids about money is a long process that needs to be a full experience. Don't just hand them some money and tell them to go shop. Model the idea of shopping by taking them with you. Simply by taking a child grocery shopping, you are teaching about adult life and what it means to be responsible with money. You should also teach kids about credit at an early age. Since credit cards and debt are such big factors in the financial lives of most people, the sooner someone is exposed, the better they should be able to handle it in the future.
Encourage Kids to Save Money
One of the best ways to teach kids about money is to set an example. If you are always suffering under mountains of debt, then surely they will do the same when they are older. Rather than spending everything you have on the nicest things, explain the importance of saving for the future. Share your savings routine with your children. For example, you could follow the ten percent savings rule. By putting away ten percent of your earnings into a special account, you can show the importance of planning for the future. Have your kids do the same thing. Offer them a small allowance until they are old enough to get a job and start earning their own income. Teach them to set aside ten percent of their allowance each week into a special savings account that you have set up for them. Every few months, show them how much money they have saved up and explain why this is important. You can also encourage them to save up for something they really want, but make sure this is in addition to the ten percent set aside. Teaching kids about money needs to be a constant fixture in your household. It's not something you can just talk about once and expect them to do. It's an ongoing learning process that is only truly accomplished through routine practice.
Explain the Importance of Credit and Credit Monitoring
With so many people in debt these days, it should be no surprise that many of these financial habits were learned behaviors from their parents. Too many people believe that credit is just a means to get things now and pay for them later. This idea leads to much irresponsible spending. Parents need to stress how much debt is too much, and they need to set the example through their own spending habits. The best way to teach kids about money is to keep them involved and have them model the spending habits themselves. Giving kids access to credit cards when they are mature enough to handle them can help them understand exactly what credit is.
Don't end the conversation about credit with how to handle a credit card. Teaching kids about money needs to be a thorough lesson that involves a discussion of credit monitoring and an explanation of how to get your credit reports. It's important for kids to understand that being responsible with money takes time and effort, and it's a lifestyle decision. If you share a credit report with them and explain the good and bad things on your credit report, they can make better decisions for themselves in the future.
All parents know that it's their job to teach their kids about many things in life. Unfortunately, not all parents understand how important money is in this equation. By teaching your kids about money from an early age, you can make sure they will be responsible with money when they are adults. These lessons about money benefit everyone involved, and reduce the possibility that you will have to help bail them out of money trouble in the future. Teaching kids about money needs to be a thorough process that involves frequent discussions, modeled behaviors, and lots of hands-on practice.