Teaching Your Children Good Money Habits
Teaching your children good money habits is very important early on in life. Learning proper money management skills early on in life will advance the child’s relationship with money in general. Sometimes families believe that discussing money around children is taboo, but in today’s society that couldn’t be further from the truth. It’s important to start sooner than later because often times children who are not exposed to a healthy relationship with money grow up to be in debt.
It is common wisdom that if you don’t tackle this topic head on, you leave your children at risk to make faulty misguided decisions about their money. Discussing money as a family is the easiest way to show your kids what smart financial planning looks like. Here are some ways you can start to show your kids the true value of money:
The first and most obvious ways to teach kids about money is to set an allowance for them. Some parents prefer to set a weekly or monthly allowance, while others prefer to pay their kids for individual tasks and chores that they do around the house. Whichever method you choose, make sure your kids understand the concept of exchanging a certain amount money for their time or merit.
Teach them about the differences between their needs and wants. This subject may be tricky because many children believe that if they see it and want it, then they should have it. Help them create a budget for what they will spend their money on. This may be better suited for children around the age of 12 who can better grasp this concept. For example, you could set aside a back-to-school budget for them and let them know that the budget is for clothes and mandatory school items. Encourage them to purchase what is necessary first, and then to use their leftover money at their discretion.
At about 16 is the perfect time to start teaching your children about the important of credit and borrowing money. This is a concept that even some adults struggle with so starting early can really ease them into having a great credit file later. If you are in a good financial situation yourself, you may even consider adding your child to your credit line or getting them a low balance secured credit card. Stress the importance of repaying their debts on time. Many teens may be tempted splurge once they have their own card so it’s important to monitor their spending.
At the age of 17 is when you should start addressing the concept of student loans if your child plans to go college. Encourage them to go for scholarships and be proactive about their plans for repayment if they do decide to take out loans. Once your child is 18 and you feel that they are mature enough to make their own financial decisions, still be a resource and guide them as you see fit. If you need help discussing finances and budgeting with your kids reach out to us here at SJK Wealth Management and we would be happy to steer you in the right direction.