Teaching Your Kids How to Manage Money
Teaching your kids to be responsible with money is perhaps one of the very most important tasks for any parent. After all, if you don’t want to be supporting them for the rest of your life, you’re going to need them to know how to manage their own financial affairs.
The earlier you start helping your kids to develop good spending habits, the more likely they will be to be financially secure later in life. Here are 5 tips to help you help your kids learn to manage their own money.
1. Make them earn money
Giving kids and allowance is a great way to get them to start managing their own money, but if you don’t want them to just expect handouts later in life, you need to not just start handing it out early on either. Kids have a difficulty making the connect between the work you do to earn money and the cash you pull from the ATM or the purchases you make on your credit card.
The first step in helping them make this connection is paying them for work. Whether it’s washing the dishes, washing windows, making their bed or cleaning their room, make sure that any allowance you give them is earned in some way.
2. Make them responsible for certain expenses
It doesn’t help make a connection between work and finite income if you simply give them money for whatever they need whenever their own runs out. Whether it is buying their own candy, their own clothes or their own video games, make sure that they are responsible for purchasing something all on their own.
If they run out of money, do not bail them out unless you want to still be bailing them out when they don’t have enough rent in their 20’s because they spent their money on other things.
3. Help them learn to save regularly and for large purchases
This is a good time to help your children start building the habit of setting aside some money from every allowance or paycheck. In addition, this is also a good time to help them learn the financial discipline it takes to save up for major purchases. Instead of buying them things like a car, cell phone or television, offer to match funds with them.
The more they participate in buying their own things, the more likely they are to take better care of them. Particularly if they know you won’t be simply replacing them if they get lost, stolen or broken.
4. Help them learn how to budget
As your children get older, you can start making them responsible for budgeting their money to cover their own expenses. At the beginning of each semester of school, you can give them a lump sum that will have to last them for several months. When or if the money runs out, there will be no more.
Help them to learn to budget for expenses like clothing, entertainment and gas or transportation expenses. Again, however, the importance thing is not to bail them out if they blow through it too quickly.
5. Help them understand credit
As teenagers, you may consider getting your child a secured credit card (which automatically keeps the limit fixed in place) or a pre-paid debit card. This will help them understand that plastic is not “magic money” that just appears out of thin air when they need it. When they are 18, you can check their credit score with them and help them understand the importance of maintaining good credit.
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