In order to teach children about money, one needs to have a healthy relationship with money. The child will follow the path the parent blazes be it healthy or otherwise. Honesty is everything. Money seems to be an undiscussed topic, especially personal finances, even with your children. Unfortunately, that mind set can have severe consequences. If money isn’t discussed, a sense of mystery surrounds it. Young adults on their own for the first time may find themselves adrift on a sea of temptation, disappointment and debt. Teaching children the value of money from an early age and developing a healthy regard for money, will aid in avoiding future financial disaster.
We are bombarded with advertising that would have us believe we are only as good as the car we drive, the house we live in and the designer label on our clothes. All that prestige comes at a price and often an unbearable amount of personal debt. If a child is indulged with everything they see and want to the detriment of your pocket book, unhealthy financial relationships are in the works. By teaching children and indeed ourselves, healthy financial
habits, we build real wealth.
When children are taught how money works, the mystery surrounding money and it’s role in life is shattered. An allowance is an excellent starting point by teaching them that money is the exchange for services. Assign household duties and pay them an allowance at the end of the week for the tasks that they complete. As the child gets older, the responsibilities may increase and so should the allowance. Having an example to work with just like real life, they learn that when their parent(s) work, they are paid and that money is used to pay bills, purchase necessities and saved.
Opening a savings account and a checking account without a bank card is a great way for children to save and learn about investing in their future. They love to see their balances grow on the pages of their bank book with each deposit they make. Have the child decide how much of their allowance will be allotted to each account and how much they will retain for personal spending. This can be adjusted as they set goals. They learn financial responsibility when they are in control of their own finances.
There will come a time when your child will ask you to purchase an item they really want. This is a great opportunity to teach them about credit. If you decide to purchase the item for your child, have them know that they are to pay for it. Send them a bill just like a credit card statement indicating the payment due date and interest that will accrue if the bill isn’t paid in full by the due date. Continue giving them a statement each month until the balance is paid in full, each time adding interest to the balance. This is an excellent way to give them a taste of the consequences of credit and how to manage it.
Being open and honest about finances is the best way for you to teach your children how to manage their own finances. Developing and encouraging healthy spending habits and automatically contributing to savings, is not only responsible, but necessary . We all want our children to lead a successful life and not want for anything, by teaching them how to handle money early, you are setting them on the path to a bright financial future.