Handling money is quite a tricky thing and one’s spending pattern gets loosely defined by the way he handles and values money as a child. It is very important to teach the value of money to children so as to allow them to have a future of minimal debt. Since debt has become one of the biggest issues in our economy, let us try to protect our children from it.
No one can live a debt free life because some debts are unavoidable but as parents, we must do our very best in teaching them ways to save money and avoid unnecessary debt. Here are a couple of tips you may find useful:
Encourage them to do chores for allowance
Irrespective of how much you love your kids, don’t spoil them silly by giving them a lot of allowance. You can give them some money as fixed allowance and let them do chores to earn the rest. This will teach them to work for their money as children and help them in the future. In addition, it will also teach them the hard work that goes behind earning money.
Let them spend from their savings
Help them to develop the habit of earning from a young age so that they can make mistakes from the beginning and understand the importance of saving a part of their money. For example, if you take them out for shopping, let your children pick out something on their own and encourage them to pay for it from their savings. This will help them to know the importance of saving their own money in order to buy something they like and will spend more wisely in the future.
Talk to them about the intrinsic relationship between saving and spending
Encouraging them to save and then spend will help them to grow into mature adults who will be able to live within their means. Living within what you have is the key to a life of minimal debt and worries. Teach them the connection between saving money before spending it. To start with, let them take a small loan from you to buy something. Allow them to repay you in installments and levy an interest rate on the principle amount. That will give your children a very realistic picture of the financial triangle.
Let them pay their own credit card bills
When you get a credit card for your teenager, do not pay their bills. You can start paying them more for their regular chores so that they can earn enough to pay off their card every month. As parents, we want to spoil our kids and make things easy for them but what might seem like the right thing to do is not always the right thing to do.
Set up a bank account for them
Open a savings account for your children at a young age. Let them learn the benefit of earning an interest on their money instead of giving an interest on credit card bills. Going to the bank from an early age will also educate them about the way a bank works.
Be an example for them
Children look up to their parents and until Jennifer Aniston takes over, parents remain the undefeated role models for their little ones. Become an example for them. Involve your children in the monthly budget planning so that they have a better idea regarding the functioning of the house. It will also teach them the privilege of keeping a budget. When you make important financial decisions, explain the reason to them.
Discourage use of plastic
Don’t promote the use of credit cards amongst your children. Encourage them to carry cash with them wherever they go. Be an example for them and start doing the same.
Teach them the art of grocery shopping
Take them to grocery shopping with you and show them your way of making prudent decisions in the grocery store. This will help them once they start living on their own.
Be sure to help them to safeguard their identity
Get an identity protection plan for your child. Talk to them about the importance of safeguarding one’s identity. Discuss the effects of identity theft and its massive impact on one’s credit score. Teach them ways to protect their own identity.
Teach or show them the difference between ‘wants’ and ‘needs’
This classification needs to be instituted into children at an early age. Do not encourage their tantrums because that will only promote their desire to fulfill their ‘wants’. They need to understand that ‘needs’ should be prioritized.
Teach them the importance of having patience
Strong moral values here refer to shortcuts for earning money or buying things. This includes buying things on an impulse. Borrowing money from their friends or using the credit card to buy something that looks appealing, will be worn infrequently and isn’t very practical can make things difficult for them later on because they will have to pay the debt sooner or later. Instead, teach them to save first and then spend their money without worrying about paying it back. It may be more time consuming but it is definitely more beneficial.
Share both, good and bad experiences from your past
Talk to them about your early financial decisions. Share your experience with them and tell them about how your decision either rewarded you or increased your expenses. Help them to learn from your mistakes.
Encourage them to save for a rainy day
A rainy day fund is a must for everyone, be it you or your kids. Ask them to save a certain portion of their allowance for a rainy day. Instead of asking them to keep it in their savings account, you can give them a piggy bank and add a little fun to it.
Teach them the real meaning of gifts
Gifts are tokens of love and appreciation. Just because you love someone doesn’t mean that you will have to spend a lot of money to get gifts for them. Teach this important principle to your kids. Let them make nice presents for their friends instead of buying them from a store. After all, no one can ever put a price on sentiments.
Reward them when they get good grades
Help them to connect performance with incentives from the beginning. Whenever they get good grades, give some additional allowance to them. This will help them to relate the two once they grow up.
This post is written by Avni Peterson. Similar post that you may also like