One of the best things that you can do for your kids is to teach them how to manage their money. Knowing how to avoid the temptation of spending every dollar that they make can make it easier for them to avoid going deep into credit card or other types of debt. It will also make it less likely that they will come to you for money when they become adults. What are some ways that you can help teach your kids learn fiscal literacy?
Take a Portion of Their Allowance Each Week
Giving a child an allowance can help them understand what it means to have their own money and how to learn to use it wisely. You can make it easier for your child to save by withholding a portion of that allowance and putting it in a savings or custodial brokerage account. While your kids may complain about it, they will watch with glee as the balance increases over the years.
Divulge Your Own Savings Habits
It may be a good idea to show your children how much you save each pay period to show them that everyone has to budget carefully. If you don't save anything each pay period, it will provide you with the motivation to start, which can have positive benefits for your own financial future.
Let Your Children Plan a Trip or Family Event
Give your child a budget to plan a portion of your next family vacation. They can choose the hotel, decide to buy tickets for a show or a sporting event or otherwise spend their budget on whatever they see fit. Getting that experience will show them how to look for deals or other ways to get creative that allow them to do what they want without going broke. This is a great way to help them learn how to be grown up and get good experience to help them out in the future.
Let Your Child Spend Too Much
One way to learn is to make mistakes on our own. This means allowing your child to spend his or her entire allowance for a week or allowing your child to take an advance on allowance owed in future weeks. After learning what it is like to not have any money to go out with friends or otherwise have fun, your child is more likely to take your lessons to heart. There is definitely nothing wrong with letting your kids spend all of their money on something frivolous just to find out that there is something bigger and better they wanted more. That is how we learn.
Give Your Child a Credit Card
If you have a teenager in your house, it may be more appropriate to help that child open his or her own credit card account. Assuming the balance is relatively low, your son or daughter won't be able to spend so much that he or she will never be able to repay the balance. This allows your teen to get used to paying interest as well as eliminating the perception that a credit card is free money as opposed to a loan that needs to be repaid in a timely manner. Furthermore, it allows your teen to establish a credit history, which could be useful when it comes time to apply for student loans. This is definitely a great way to start teaching financial responsibility to your kids before they head off to college.
Keep the Lines of Communication Open
There is never a bad time to explain why you chose to spend money on a particular item or why you took out a loan. For instance, you may need to work with someone like a payday loans Texas lender to pay a light bill or make sure that the kids have a place to live. However, you should explain that taking a loan should be a last resort and that other options may be available.
Your legacy will be partially determined by how well you raised your kids. While nobody is perfect, the goal is to make sure that they absorb the lessons that you have taught them. By using real world examples and constant reinforcement, you can teach your kids the value of a dollar and set them up for financial success.