As families continue to adjust to an economy that is very different from just a few years ago, parents are realizing how important money lessons are to the future of their children.
It is true that kids will take what they want out of lessons learned in their youth, however if something becomes part of their day-to-day life, there is a good chance they will carry that behavior into their adult lives.
For this reason the lessons your children learn today about managing money can have a huge impact on their quality of life for years to come. The first place we learn money lessons is from our parents, therefore setting the right example is key.
Here are a few lessons your kids should be learning that will help them manage their finances better in the future.
- How to handle cash – Sometimes it is hard for parents to give up control, however in this case letting your kids actually manage their cash begins with -having control over it. By allowing children (in an age appropriate manner) to pick and choose how they will spend the money they have control of, they will learn through trial and error the benefits of saving or at least thinking twice before making a purchase.It is important to note that while the point of this lesson is control, as the parent it is your job to decide how much money they are controlling. If a 5 year old gets $400 for their birthday – no one is recommending he or she have control over all of that money. Instead set a certain amount that he or she can spend on whatever they would like. The rest of the money should be placed in a savings account or other savings tool to grow over time.
- Budgeting and bills – This might seem a bit intense for children, yet once kids are old enough to understand the concept, include them in creating and maintaining the household budget, which can be very beneficial. If finances are tight, there is no need to pass that worry onto your children, nevertheless they can learn why it is sometimes necessary to cut out certain expenses or reduce spending. When there is extra money in the budget, allocating money toward savings is another lesson to be learned. When children are older, begin introducing basic lessons on different savings strategies, such as CDs and bonds. Again, age appropriate lessons are key to avoid overwhelming your child and losing their interest before you even get started.
- Debt and why it should be avoided – There are few adults in the world who can say they have never been in debt. Unfortunately the number of folks over their heads in debt continues to grow. Along with responsible spending and saving, knowing how to avoid debt is one of the biggest lessons that can be taught to a child. If the lesson is learned before striking out on their own later in life, it can literally save them from a lifetime of financial struggle.
When teaching your kids about money, don’t forget that we all learn better by example. If you are ambivalent as to how you pay your bills or use your credit card irresponsibly there is a good chance your children will grow up to do the same.
Conversely if you have made mistakes in the past and share with your kids how you have overcome the obstacles created by poor money management, you can teach them another valuable life lesson. It is our responsibility to raise the next generation to understand the value of money and the importance of managing it well.
Trisha Wagner is a freelance writer for DepositAccounts.com, where you can compare rates of savings accounts from dozens of banks in one place.