I believe all children should learn to be budget conscious, so I thought this would be a great guest post to share with you today.
When the U.S. fell into the worst recession in decades, everyone was quick to point fingers and place blame. Blame the banks for lending money to people who shouldn’t have passed credit. Blame the government for failing to regulate Wall Street. Blame the people who chose to live beyond their means. Maybe none of these people or entities are responsible for the housing crisis, maybe all of them are, but one thing is certain, giving your children a financial education is a must.
Three simple ways to foster financial responsibility: From elementary school to high school, these three steps will help you instruct your children on how to make better financial decisions.
Slightly more than half of all parents give their children an allowance. If you’re going to give your child an allowance, why not make them earn it? After all, once they leave the nest, they’ll likely have to work for a living. Teach them that money is worth more than what it can get them. It is the reward for their hard work. Set up a chore chart or goals for improvement or good grades at school. Giving these things a monetary value helps to incentivize your child’s achievements at home and school.
When it comes to non-essentials, teach prioritization
Parents give children the things that they NEED, but there’s nothing in the parenting guidebook that says you have to give them everything they WANT. If they’re old enough to ask for extras (toys, entertainment, special treats, etc.), they’re old enough to earn an allowance to pay for it. Help them prioritize the things they want. If one of those things is a big-ticket item, help your children create plans for how to save and budget over time. Set up the “Bank of Mom/Dad” where they can give you back a portion or all of their allowance for safekeeping while they’re saving up. If you really want to double down on the learning opportunity, offer them varying interest rates on their deposits!
Use your own financial decision-making process to create real-world examples
Talk to your older children about more complex personal finance issues. Without giving away more information than they need about your own financial standing, share an experience or lesson with them. Ask them questions to gauge their understanding, and be ready to answer their questions for you. Watching the financial news reports or reading the financial section of the newspaper together can be a great conversation starter. Teenagers especially need to understand borrowing and the credit system. As soon as they turn 18, they will be bombarded with offers to sign up for high-interest credit cards. They’ll be faced with decisions about funding higher education and making major purchases, such as buying a car or mortgaging a first home. As soon as they enter the working world, your kids will have to think about planning for retirement. Talk about these things early and often to empower your kids’ financial intelligence.
Give your kids the tools to help them make the right decisions, and when the time comes, they will be set up for lifelong success in the realm of personal finance.
Blogger at Save On Energy