Growing up there wasn’t much of a discussion about money. We either had it or we didn’t, and when we didn’t, we didn’t know it. To my parents talking about money, other than the brief money lessons on tithing, was taboo. Like many of you, my first introduction to financial responsibility was opening a checking account on my 18th birthday. I didn’t even know how to balance a checkbook. The second was a call from the Visa card company offering me a shiny new credit card. Followed by a car loan I could barely afford. Needless to say, turning 18 meant the introduction of debt into my life. My parents taught me a lot of great lessons during my formative years, but somehow financial responsibility was not one of them.
Now that I have children of my own; I have thought a lot about the money lessons I want to teach them and the good money habits I want them to have before they reach adulthood. Many of you may wonder at what age to begin money lessons and the simple answer is, as soon as they can count.
My sons see their Dad and I sit down to pay the bills, go over our budget and make a money plan for the upcoming week. They see us make purchases with both cash and debit/credit cards, they know we have a budget and when something in not in the budget, it’s not in the shopping cart. Money is not a taboo subject in our home, we talk about it often. While it is not the main focus in our family, it is not hidden either.
Money Lessons I want My Children To Learn
Money doesn’t grow on trees. As parents it can be very tempting to just purchase the things our kids want (not need) for them. While a special treat once in a while is great, teaching our children that money doesn’t just appear in mom and dad’s wallet, that you actually have to work for it is a much better lesson. It will help set them up for a healthy financial future. Kids as young as two or three can start helping around the house doing simple chores and your preschooler will love receiving a paycheck for doing some extra jobs. However, they must also learn that there are chores that we do out of love for our family as well.
How To Budget. Learning how to budget is as fundamental as learning how to tie your shoes. If you want your money to work for you, and not just run through your fingers like water than living by a budget is a must. Helping your child develop this skill at a young age is easier than you think, and by starting as early as preschool it will naturally become a part of their values.
Don’t Give Your Child An Allowance. When you go to work do you earn an allowance or a paycheck? Giving your child an allowance sends the message that this is fun money, its money to be played with and to not be taken seriously. Your child knows that you go to work and earn a paycheck from your job. Giving your child a paycheck for the hard work they do, not only teaches them the meaning of the word, but reinforces the value that work equals pay. Then one day when they get their first real job they will understand that the money they have earned isn’t just for play but must also be used for taking care of their responsibilities like paying for the gas that goes in their car.
How To save for the important things. Once your children have earned their paycheck, the tendency will be for them to want to spend it. Instead of allowing them to blow their money at the Dollar Store, teach your child the importance of saving for larger items, or for important events like a trip to the water park. A good rule of thumb to follow is, save some, spend some and give some. Instilling this important habit will help give them good lifelong spending and saving habits.
Why they shouldn’t take on debt. For many people, debt is a way of life. It’s a vicious cycle they can’t seem to break and it can quickly become overwhelming. Using debt as a way to live above your means or to even stay afloat with your daily expenses a recipe for disaster. If your child learns to rely on debt instead of a budget, good money habits, and savings they will be a slave to the bank, and their hard-earned income will go towards paying off high interest rates instead of building wealth and a worry free retirement.
When it’s okay to take on debt. If you are a money wise individual there are two areas where I believe taking on debt is okay. The first is an education, many jobs now require you to have some kind of higher education to be considered for the position. The amount of debt you take on should be kept to a minimum by taking advantage of high school duel enrollment classes, using savings to pay for courses, applying for scholarships, and FASFA. Attending a community college while taking your prerequisite courses before attending a four-year in state school will also save your college student a lot of expense as their credits often transfer and cost a fraction of what a four-year school charges for the same education. Remember, no one is required to go out-of-state for college, or to attend an Ivy League institution.
The second form of acceptable debt is a home mortgage. Rarely does anyone have enough cash to pay for a house entirely. However, before you ever start house hunting you need to have a budget in place, and a 20% down payment. Owning a home, if you can afford to, is a better option than renting as the payment you send in every month goes towards paying off your home mortgage, builds equity, and when you pay off your home you wont have to worry about that added expense in your golden years.
How to properly use credit cards. Credit card applications are handed out like candy at Halloween, on college campuses. Teaching your kids how to be responsible with credit cards before they are ever old enough to have one is a good way to ensure they will know what is at stake by using this form of debt. There are basic terms and conditions they need to understand before they ever open a credit account including, minimum payment, interest rates, late fees, and terms of service. Teens should also be taught that if you put something on the credit card during the month, then they should have the money in the bank to pay it off at the end of the month. Don’t wait for the bill to come in and the interest to be charged to their account. Pay the debt off completely and as soon as possible. The hope is that they don’t ever utilize this form of “credit building”, but if they do they will at least be educated on the right way to handle it.
By starting money lessons young and continuing your child’s financial education through their preteen and teenage years you will be sending them out into the world better prepared to handle their finances wisely.
How can you get started today on your child’s financial education? Is there something your family is doing to teach your kids financial responsibility? If so, please share it with us your money lessons, as we can always use a few more great ideas.
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