Tuesday, August 5, 2014, AM | 1 Comment
Talking to your children about money management is one of the most important jobs parents have, and it is never too early to start. Having a vast understanding of saving money and knowing how to spend wisely can make a tremendous difference in their adult lives, and it is a conversation that should continue throughout their childhood.
If you are unsure where to begin the money management discussion with your children, here are a few topics to help you get started.
You may think that it is too early to talk to your ten year old about the concept of debt. However, debt can be the very thing that can destroy their financial lives when they are older.
Learning about how a mortgage works or understanding the concept of a car loan can be a huge eye opener for children to comprehend the importance of work and savings.
Besides, it would be interesting to know what they currently think you did to get the house you live in or the car you drive. You may be surprised, not to mention entertained, by some of their answers.
Understanding Credit Cards
According to D Thode & Associates, credit card debt is on the rise among college students. Because it is so easy for a college student to get a credit card, it is very tempting for them to use them. While they may have great intentions to use the card wisely, this is often not the case.
Talking to your children about the dangers of credit cards and not spending money that they don’t have could make the difference in responsible decision making when they get older.
Children should be taught to only use a credit card for small purchases and to pay the card off at the end of every month.
Needs and Wants
Making sure your child comprehends the difference between a need and a want is critical in helping them understand how to spend money wisely as an adult.
A great way to do this is to invent a hypothetical family budget with income and expenses Explain how much of the income is used to pay expenses, and show how little is typically leftover every month to pay for wants.
Keeping Good Credit
While you don’t want your children to over-use credit, it is important for them to know how to keep good credit.
Explain the importance of paying their bills on time and how bad credit can keep them from getting a loan for a car or a house.
Saving and Investing
Teach your children to save money by giving them an allowance to manage. Help them to set goals for things they want to buy and how to save money for them.
By teaching them to work hard and save their money as children, you will help them carry those values into adulthood.
While you can’t prepare your children for every financial situation in life, you can teach them to be as fiscally responsible as possible.
Growing up with the knowledge that they know how to manage their finances will help them be more confident and self-reliant adults.Facebook.com/doable.finance