As adults, we’ve all made a mistake or two when it comes to our finances. We may have spent frivolously in our early years, got into credit card debt buying things we couldn’t really afford, or just did not have the respect for money that we do now. If there really was such a thing as time travel we could go back and reverse all those bad experiences and do things the right way.
Well, unfortunately, there is no real way to time travel, but as parents, we can teach our children to manage their money, use credit cards responsibly, and hopefully they will avoid making those same mistakes in their own lives.
Teach these principles to young children:
Teach them to work early on. Kids find out quickly that money relates to the items they want. As they grow into teenagers, they want more things, and those items can carry a hefty price tag. Teach them to work for what they want. Chores and allowances when they are young, transitioning into summer jobs when they are older. Instilling a good work ethic keeps them from developing the mentality that the world owes them something.
Show them how to save money. It’s hard to save money sometimes, even for adults. It is easier if you make it a habit from the beginning. When they receive their allowance, teach them to put 10% of the total aside for later. This amount can be increased as they get older. They can put it into a savings jar and decide what they will use the money for when they have a certain amount collected. If they do this when they are young, by the time your children are 18, they will have enough saved for something they really want.
Teach them to be giving. We want our children to be charitable and have a heart for others. A good way to teach that is to have them choose an organization that they want to support, and each month have them donate a certain amount to that charity. It doesn’t need to be a lot, but the lessons they are learning are about compassion and empathy.
Teach them about the pitfalls of debt. Debt from credit card spending affects a large portion of the adult population in the US. It is estimated that the average American household owes over $7,000 to credit card companies. Kids are often introduced to credit in college, but if they are not taught how to manage money before then, they can make some substantial financial mistakes that can cost them more than just money.
When they become teenagers, follow up with these:
Show your teen how to use a calculator. There are tons of free savings calculators that they can download to their phones to help them figure out how much something will cost. It will teach them always to consider the cost of something first.
Help them to build their credit. This is a big one because having no credit history is just as bad as having bad credit. Help your children to sign up for a secured credit card or a limited credit card, but make sure that it reports to the credit agencies. Teach them how to make smart purchases and pay off the balance at the end of each month. If they are very responsible, you might consider co-signing for a short-term loan ($300) to get them started. Not having sufficient credit history is one reason adults get denied for home loans.
Show them how to check their credit report. After they have successfully made a few payments on their loan or credit card, show them how to check their credit report. They will need to check this periodically because agencies do make mistakes, and if caught early, won’t affect their history.
Calculate the total costs of items including interest A $500 big-screen TV doesn’t really cost just $500. When you include taxes and interest, that small percentage adds up to a lot more than it would to only pay cash for the item.
Money provides us with financial security, the ability to have the things we want in life, and we can pass that same knowledge onto our children so that they grow up with the skills to create the kind of life they want for themselves. Teaching them to manage their money is giving them valuable skills that will serve them well in their adult lives.