How to Teach Your Kids about Money
A popular question on the minds of many adults is when they should begin teaching their children about money matters. There isn’t a uniform time to begin instilling good spending or saving habits in young people, but according to bettermoneyhabits.com about 54% of parents in the United States begin to give their kids an allowance by the age of eight. As your child gets older, money will become a bigger factor in their life. It is crucial to help them understand how to handle their money now to avoid financial issues later on.
Manage Their Allowance
If you decide to give your child an allowance, it doesn’t mean you don’t have to keep watch over how they spend it. Much of the lesson in financial responsibility resides in what your kids do with their money, not just whether they receive it. Even if you don’t provide an allowance, regulating how your child spends birthday or holiday gift money can still instill good habits. Manage their money to show them how they should approach money matters in the future.
Having a clear distinction between spending and saving can create a great foundation for how children view money going forward. It might be easier for a child to understand spending money than saving money. Finding innovative ways to make saving as interesting and important to your child as spending might be can prove beneficial for their development. Consider allocating a certain percentage of whatever money your child receives towards savings while also explaining the importance of saving as a process.
As stated early, most parents give their children their first allowance at the age of eight. There is no uniform method of starting children on allowance. Generally speaking, many children don’t know the importance of money as of yet, so you will be able to completely mold their take on money. Even if your child asks money-related questions, being as straightforward as possible might give them a better understanding of how money works. Try to involve your children to an educational extent, without divulging sensitive information.
Create a Savings Account
After making the decision to give your child an allowance, the next step would be to help foster a healthy saving oriented behavior. While kids may be more concerned with buying a new toy or app, teaching them to save can save them in their later years. Creating a dedicated savings account for your child will not only give them a visual representation of what they save, it will also teach them the benefit of having a savings account. It’s much easier to view interest accumulate than to try and explain it to your child.
The easiest way to teach your child about saving is to create a savings account in your bank or credit union and have the funds go there. You can either deposit the money yourself or teach your child how to do it (with your accompaniment). If you choose to make the deposits yourself, you can then show bank statements to your child to teach them how the money accumulates. In many savings accounts, interest will build monthly and add to the contents of the account. This can serve as another learning opportunity to describe how savings accounts work.
Help your child understand the importance of a savings account by having them think of a reason to save money. Let them calculate how long it would take to save up the money so they can have a goal to reach. Just like how adults budget their monthly income to pay bills and save, children can do the same thing on a smaller scale. Learning how to save for large purchases now will help your kids budget well when they want a house or to go on vacation as an adult.
Age Appropriate Money Teachings
As your children get older, their wants and needs begin to change. With this growth in need, a growth in allowance might be warranted, as well as a different method of teaching how to handle money. At this point, it’s possible a child might show advanced money handling behaviors for better or worse. This will be the time to either reinforce the positive behaviors or correct the negative ones. Answer any questions that may arise as well. The less confusion your child has about money, the less likely they will make poor financial decisions.
If your child shows positive growth with their money handling ability, you might be able to give them extra responsibilities. A sign of good money management can be shown in a growing financial independence in your children. If they don’t ask you for money regularly, it may be due to their understanding of how money works. If you give your child an allowance and they still ask you for money, you might want to reconsider your approach to teaching financial responsibility.
Once your child reaches their teenage years, it might be a good idea to introduce them to the concept of debt. Most kids will head from high school into college without having experienced debt or knowing how it affects them. This can lead to having issues with debt as an adult. Grasping the idea of debt from an early age can create a sense of awareness in your child. Giving your child the gift of financial readiness can help them to avoid many problems in the future.
As children are born into the world with no debt, it helps to fashion their financial future to be the best they can be. However, not many have had the opportunity to learn about money management or debt early on. As a grown up, falling into serious debt can be both rapid and crushing. If you find yourself in financial trouble with your unsecured debt, don’t hesitate to contact Guardian Debt Relief to see what we can do for you. Our debt specialists are standing by to answer your free consultation call. Take the first step and contact Guardian Debt Relief today!