Teaching Your Kids About Money
Many adults find themselves constantly deep in debt even as they climb the economic latter of success. They seem to acquire a lot of “material things,” but their financial situation never seems to improve, and for many it worsens as their income rises. Where does money horror start, it starts with you; not teaching kids about money, your kids and those around you.
The reason for this is because many adults transfer poor budgeting and spending skills from childhood to their adult life. Like most other skills, budgeting and spending habits start early in life. The earlier you start to teach your kids about budgeting, and train them to “spend money wisely,” the better their spending habits will be in the future.
Listed below, are a simple set of budgeting and spending rules you can review periodically with your kids:
Live on less than you earn. Point out to your child they don’t need everything they want. Showing self-restraint in spending will help them build strong character. It will also help them to develop strong and good spending habits for life. Explain that some people run out of money in their lifetime, and what bankruptcy is — but, if they develop good spending habits; that does not have to happen to them.
Understanding how to be frugal with money will prevent them from running out of money and developing a habit of living on credit or developing credit problems.
Start to save early.
The earlier you start, the less you have to save per month to reach your goals. Use our monthly deposit savings calculator to demonstrate two different savings scenarios. Try two different scenarios, one where you save $50 per month for 20 years, and one where you save $200 a month for 10 years, use 6% as your interest rate. You will be surprised by the outcome. You can think of many of scenarios to put in place with your kids.
Create a well thought out spending plan and a budget.
The more you plan in advance, the less your chances of major spending errors now and in the future. Teach your child there is such a thing as a budget and spending plan. Entertain the idea of having multiple jars as piggy banks. One for a bike, one a computer game, one for a new computer, one for a new skateboard. Then add the idea that you may do a match of funds saved by your child, so they learn the idea of teamwork with parents. Chores will suddenly become easier as they will have goals for their savings.
Establish long-term and short-term goals for your money.
This will enable your child to establish an account for both, and save accordingly. Your child should know that they cannot reach a goal, if they haven’t established a goal, and worked toward it in advance.
Know the difference between a “want”and a “need.”
You can explain to your child that this will prevent them from purchasing what they want, and then not having enough money to cover their needs. Instruct them to make a list of wants versus needs. Then cross off the things they don’t really need, and in the wants column cross off the things they may not really want, the things that are not useful, or will not last or will become boring quickly. You can think of many reasons to cross things off the list, allow your child to think deeply about these issues.
Now they have to learn the importance of protecting the things they have.
Explain the different types of insurances and when each is appropriate. Explain to your child the consequences if they pull out of the driveway in an uninsured car, (whether it is theirs or it belongs to someone else), and it wrecks with another car. Some parents think this is obvious to the average teenager, but you would be surprised.
The Live Rich Save Money! Easy Budget Planner will prepare you and your kids for financial growth
Read the ebook together on saving money: Live Rich Save Money! 68 Ways to Save Now and Forever
Use my financial calculators to calculate a whole host of financial scenarios.