It is amazing how little students actually learn about money in school. Do they know how to spend, how to save, how to invest, even how to balance a check book? No. Learning about personal finance and managing money resources is something that is not taught in school. But, every child should have the opportunity to learn about money, and the best way is through their parents.
Money and money management is based on values that have to start being taught at a young age. The first thing a child should learn about money is its value. Are you rich if you buy expensive things or if you save? That’s an important discussion. Next, from the time a child asks for a toy, it’s time to give your child an allowance and teach the lesson that you spend only what you earn and save to get what you want. You can set up a savings account in your child’s name such as the one ING DIRECT offers: the ING DIRECT Kids Savings Account℠. No fees. No minimums. Open online. Another early lesson is even if you have saved, not all the savings can be spent on you. Insist some of your child’s savings always stay in the bank. Also help children learn that some of that savings must be shared with a charity. Let the child choose his or her own and contribute to something beyond his/her needs.
As children grow, there are more financial responsibilities for them to think about. One is that mom and dad can be the bank and offer loans and give interest breaks but not always. Let your child understand about bank accounts and taking out loans. Walk them through the process and even let them take out a small loan for a larger item like a kayak. If the child is under the legal working age, he or she should still be thinking about earning money—not by getting good grades or helping out around the house; those things should be expected as being part of a family. Help them brainstorm ways to earn money from others by babysitting, doing lawn work, or helping out a neighbor who is away by feeding their cat.
As a child becomes a young adult, it’s time to let him make her own mistakes and learn the consequences. Introduce them to a stock broker and have them start a small portfolio. They can watch how it grows…or not. If they have a credit card, don’t supervise every penny spent, but do make sure the credit card balance is paid each month and take the card away until it is paid. Finally be a model. Know your own spending limits and maintain those with your child both for daily things and for their college education. Also be sure you are financially solvent. Children will so as their parents do, even if you think they were never paying attention and listening.
For more tips go to Pennypinchinghints.com and read “Everyone in the Family Should Learn to Budget.”
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