Family Finances: Six Musts for Teaching Your Kids About Handling Money
Wednesday, October 16, 2013, 6:00 AM | Leave Comment
In today’s society, knowledge of handling money is invaluable. Unfortunately, many college freshmen leave home without an understanding of basic financial principles. This lack of knowledge leaves them susceptible to poor decision-making regarding their finances, but prevention is the key.
Using the six guidelines below to teach young children about money enables them to become financially savvy adults.
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Introduce them early
As soon as children learn how to count, introduce them to money and its value. Setting up a store at home is a great way to do this. Place homemade price tags on a few household items and give each child a set amount of cash. Let the children act as both shoppers and cashiers. Letting the children shop in the store teaches them the value of money, and having them act as cashier teaches them how to make change.
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Discuss the hazards of loans
Children inevitably ask to borrow money, so when the situation arises, agree to give them the money, but charge them interest. Explain the amount of interest the loan will have, and show children the amount of money they will pay back.
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Explain the different options of payment
Though it may be confusing at first, discussing the four main forms of payment – cash, personal checks, debit cards, and credit cards – with children is necessary. It enables them to develop a more mature financial understanding and empowers them to make better financial decisions in the future.
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Practice check writing
After educating children about forms of payment, teach them how to write personal checks. To familiarize children with personal checks, find a checkbook that has something they like and is personal to them, like cheap Disney checks. This will make writing checks more fun to them, and they will still learn the principle of spending their money.
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Decide between wants and needs
Children often have no concept of wants and needs, lumping everything under needs, but helping children realize the difference between a need and a want enables them to make better spending decisions down the road.
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Hold regular discussions
Because finances are such a large part of life, discuss them regularly with children. Holding regular financial meetings allows children to ask questions and grow in their financial understanding. When they are old enough, you can refer them to financial websites where they can read about finance and discuss it with you during your regular meetings.
Learning about money and how to handle it is important if children are to become financially independent, and the best way to teach them is through practice and repetition.
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