I have a special guest writer this week, Debbie on Financials and your children!
Ask any person who has struggled with credit problems
what they wish they had done differently about their finances, and chances are
that many of them would say they should have learned more about money when they
were young. Unfortunately, many parents
do not teach their children anything about smart money management, and these
children often grow up with no understanding about how to save money, how a
credit card works or even what everyday items cost. Without such basic knowledge, many young
adults find themselves over their heads in debt, even if they have a good
job.
A little bit of financial education early on can make a
big difference in a child’s life later on.
Make these steps a regular part of your daily life and your children
will soon learn enough about money to make sound financial decisions in the
future.
1. Give your child an allowance.
Whether you tie your child’s allowance to chores or give
them a set amount each week no matter what they do, an allowance is a good way
to start making children responsible for their money. Set ground rules about how the money may be
spent and then stick to them. For
example, maybe allowance is to be used for “extras” such as trips to the movies
with friends or some toy they want but do not need. Do not supplement the cash you give your
child if the allowance runs out and they will learn to think about their
purchases ahead of time and realize that wanting something is very different
than needing it.
2. Open a savings account.
Teach your children how to save for special big purchases
by opening a savings account for them; many banks have programs for young
people. If your child has a job, suggest
that a certain percentage of their earnings, plus birthday and other monetary
gifts be deposited in the bank. Your
child will get satisfaction from the effort of saving for a big purchase and
also will gain an understanding about how difficult it is to save. He or she will also see their money grow
through the accumulation of interest.
3. Talk about credit cards.
Avoid credit troubles later by teaching your children
about credit cards now. If possible,
stress the importance of paying off your balance each month and explain how
high interest rates could end up costing them hundreds or even thousands of
extra dollars. Warn them about
attractive-looking offers of credit that switch to much higher rates
quickly. For older children you can even
lend them money and then charge them interest until they pay it back so that
they learn how quickly interest adds up when they borrow money.
4. Give money away.
A good lesson about finances is not complete without a
discussion of charity. Encourage your
children to donate a portion of any money they earn (and even some of their
allowance) to a charitable cause of their choice. This will help them understand that not
everyone can afford the things they can buy and also help them value the money
they earn.
Debbie Dragon is a financial writer for
MyBankTracker.com, a site that helps consumers compare savings
accounts, CD rates, and home equity loans to make informed
banking decisions and save money.
