Guest post, by Charles Tran
Financially responsible adults are usually grown from financially responsible children. If you want to give your child the best chances of financial health, then begin teaching them financial lessons today. Financial responsibility can never be taught too early.
Even if your children are years are away from heading out into the world on their own, there are a number of ways you can begin teaching your children about finances. Here is our list of the top financial lessons to teach your child:
- Hard work pays off – Let your children see you work. Show them your paycheck, and explain to them that they must work to earn money. Set a good example by paying them a small amount for accomplishing chores around the house. Although some parents feel that allowances are not important, they are a great learning tool, as they allow children to understand that working hard pays off – and that money does not come easily. Once they have a few dollars to their name, it opens the door to further teach them financial lessons.
- Saving is important – Saving for a rainy day is a lesson that even the youngest child can understand. Make saving more enticing for your little ones by paying them “interest” on what they save in their piggy bank. Giving them a dime for every dollar saved can quickly illustrate to them the value of saving (and even compound interest for older children!).
- You must spend within your means – One of the most important lessons we can teach our children is the importance of spending within our means. If you teach your child to spend no more than she “makes” in her allowance, she will likely make the same prudent decisions as an adult – using her credit card wisely and paying off the balance each month. Learn to make a debit card purchase also.
- Budget yourself – Teach your children the benefits of making a budget, and help them to make a budget based upon their allowance. Show them your household budget and how you work to pay your bills and save each month. Showing your children your household budget will also likely give them a better understanding (and perhaps a newfound appreciation) of the sheer cost of maintaining a household. They will more easily understand why you are saying “no” to the $40 collector’s edition Barbie!
- Borrow responsibly – Teach your children the benefits of borrowing money to achieve large financial goals, such as a home, car, or even a fancy watch. However, also teach your children the responsibility that comes with borrowing money. From credit card bills to car notes, teach your children that borrowing comes with its share of responsibilities, and that repaying debts is vital for maintaining a good credit score. If your teenager asks to borrow money from you, then lend it to them – with interest. This will quickly demonstrate the importance of borrowing responsibly. (Barb’s comment; I’m not a fan of lending to family memebers as it can get messy really fast. I would rather give a gift. If they want to repay, okay, if not, it hasn’t damaged the relationship)
It is never too early to begin instilling financial prudence in your children. By using their allowance, spending, and borrowing habits as learning tools, you will raise financial responsible children who will carry monetary wisdom into their adult years.
Barb’s question; What tactics are you using with your children, or did your parents use with you to impart smart money strategies?
