I typically write about issues that families face on a daily basis. One area that I haven’t touched on in a while is kids and money.
“Below is a guest post from Joy Mali who writes about financial management tips – specifically, she advocates that college-age students and young adults check credit report and credit scores regularly before applying for student loans.”
Every parent wants their child to become financially responsible by the time they become adults. But it’s not as simple as giving them money and letting them spend it on their own. Helping kids with money is crucial and there are proven ways to help them better understand the importance of money and how to handle it well.
Provide an Allowance
Giving your kids their own allowance is probably the first part of the challenge. You can also teach them about having a deposit plan and explain its importance. This will help your child understand the importance of their savings account when they reach the age where they can make financial decisions on their own.
An allowance helps your child understand that money doesn’t grow on trees and that people work hard to earn it – which is why they should use it wisely all the time. Reinforce to them that every time they buy something, even if it’s just a candy bar, that money is hard earned and they can’t just get it anywhere.
Tell Them about Credit
It is important that you also teach your kids about credit cards as well. While they don’t necessarily have to start using credit cards at too young an age, they need to understand the importance of building a good credit history if they intend on purchasing a house in the future.
Additionally, kids need to understand about loans, interest and the cost of money over time. Such information will be a help for them in the future – if they know how to handle it well from an early stage, the easier it will be for them to make wise decisions about loans for their own college education, future home purchase or college expenses for their own children if borrowing is necessary.
Lastly, help your kids become accustomed to spending a portion of their allowance. Let your child withdraw some of their money every once in a while. It will give them a sense of responsibility knowing that they are using the money that they worked hard for.
These basic, common sense steps will help establish your child on sound financial footing for their future.
Question: What lessons have you used to teach your kids or grand kids about money?