In today’s economic environment, understanding how money works and how to make money work for you are critical life skills. Unfortunately, young adults are now entering a world where they don’t have time to learn financial skills gradually. Often they become victims of poor credit and debt practices before they realize how it even happened. Even if your children are very young, remember that the sooner you start teaching them money and personal finance skills, the more apt they will be at applying those skills when the time comes.
One of the most difficult issues parents have to face is step one. This first and most important step is to examine your own attitudes about money. This is extremely important because your children learn more from what they see you do than from what you tell them. You can preach to your kids every day that “A penny saved is a penny earned,” or that “A fool and his money are soon parted,” but it won’t do any good if they see that you waste your own money consistently.
It is very important to communicate openly with young kids about money, in simple terms that they can comprehend. Too often, young adults have to learn about credit and debt the hard way: by fending for themselves. It is better that they learn about personal finances under your guidance. Following are some tips that will help your younger children get off on the right foot financially.
Involve them in financial planning
While a young child won’t understand investing at the complex level of an adult, a savings account in his or her name will help them understand the basic benefits of saving money and watching it grow.
Give your child a chance to be in control
If you give you child an allowance, let him or her be in charge of spending it. This is a great way to teach the relationship between their actions and the positive or negative consequences that follow.
Provide extra income opportunities
Help children learn that money is something you earn, not something you are entitled to. This is also a great way to get the child involved in extra family chores.
Take your child shopping with you
Explain to them why you make the decisions you make while shopping. By showing them the details you take into consideration, you’ll be teaching them how to be a wise consumer.
Taking these steps will go a long way in setting a foundation of good personal finance skills for younger kids.