Finance 101 for Children
One of the greatest gifts that we can give our children is teaching them how to manage money. In today’s world where they are constantly bombarded with advertisements for everything from technology to the latest fashions, it would be very easy for them to spend rather than save.
Our children grow up watching us and how we handle our money. They see us writing checks or paying bills online, using ATM machines and purchasing things with credit cards. If we start teaching them when they are very young how to manage money, they will be better prepared to avoid financial issues as adults.
One of the first things we need to do is talk about money and proper spending habits. Explain to them the difference between wants and needs, and the value of saving money for the future.
Start giving them a small allowance early, and increase it as they get older. With the increased allowance you can give them certain things that they will be responsible for purchasing. Their allowance should not be tied to specific chores, but as a way to teach them about managing money. Performing household chores is something that is expected from all family members.
Let your child manage their own allowance money and let them make mistakes. They may make a purchase they regret, but this is how they learn. In the future they will put more thought into what they want to spend their money on. It is also a good idea to teach them how to track their spending; it can be a great learning tool when they see how they are spending their money.
When they start earning their own money help them open a savings account and set up a plan for saving. Encourage them to save for a larger purchase in the future, such as a car. Once they are old enough (early teens) have them open a checking account. Have them write a few checks a month to make payments, and teach them how to balance a monthly statement.
Talk to them about credit cards and how to properly use them. Explain how easy it is to incur debt, and the amount of interest that can accrue while trying to pay it off. Educate them on their credit score, the impact credit card debt can have on their credit, and the long term effects of bad credit.
Encourage them to think of others as they learn to budget and manage their money. Even a small donation to a charity, local shelter or soup kitchen can make a difference. Instill in them at an early age to think of those less fortunate than themselves.
Remember, they will learn the most from watching what we do and how we manage our money. Be sure to set a good example.
One of the first things we need to do is talk about money and proper spending habits. Explain to them the difference between wants and needs, and the value of saving money for the future.
Start giving them a small allowance early, and increase it as they get older. With the increased allowance you can give them certain things that they will be responsible for purchasing. Their allowance should not be tied to specific chores, but as a way to teach them about managing money. Performing household chores is something that is expected from all family members.
Let your child manage their own allowance money and let them make mistakes. They may make a purchase they regret, but this is how they learn. In the future they will put more thought into what they want to spend their money on. It is also a good idea to teach them how to track their spending; it can be a great learning tool when they see how they are spending their money.
When they start earning their own money help them open a savings account and set up a plan for saving. Encourage them to save for a larger purchase in the future, such as a car. Once they are old enough (early teens) have them open a checking account. Have them write a few checks a month to make payments, and teach them how to balance a monthly statement.
Talk to them about credit cards and how to properly use them. Explain how easy it is to incur debt, and the amount of interest that can accrue while trying to pay it off. Educate them on their credit score, the impact credit card debt can have on their credit, and the long term effects of bad credit.
Encourage them to think of others as they learn to budget and manage their money. Even a small donation to a charity, local shelter or soup kitchen can make a difference. Instill in them at an early age to think of those less fortunate than themselves.
Remember, they will learn the most from watching what we do and how we manage our money. Be sure to set a good example.
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