Teaching Kids about Money
An important lesson
Follow these five tips to help your children build responsible spending behaviors that can last a lifetime.
It’s never too early to start teaching kids about money. Young children can learn valuable money management lessons through their interaction and activities with parents. Use daily errand activities like going to the supermarket or bank to teach kids impromptu lessons about budgeting and money. Give your children toy money and encourage them to "play store."
A weekly allowance is a good way to teach children about using budgeting and spending responsibly. Pick a reasonable amount and give it to them in small denominations. Encourage children to save a portion of their allowance each week by calculating how much they could save in a month or a year. Opening a savings account for older children will educate them about making deposits and withdrawals.
Wants vs. needs.
Explain the difference between wants and needs to children. Encouraging them to earn and save for something they really want is a smart way to teach healthy spending habits and delayed gratification. Help your child keep track of their savings with a chart or offer them some "piggy bank" incentives, e.g., for every $20 they save, you will add five more to the bounty.
Giving a teenager a prepaid credit card or access to a parent's card is fairly common these days. While this is a convenient way to introduce your teen to the world of credit, it can lead to some startling monthly bills. Set guidelines for their use of the card and explain how credit works. Sit down with your teen each month and go over the credit card bill and receipts to show them how fast their charges can add up.
College can be treacherous for students with credit cards. The pressure to spend on a limited income often causes college students to create debt problems. Teach your kids about responsible credit card use, late-payment fines and how to live debt-free. If you are nervous about their overspending, make an agreement about online money management, find a pre-paid card or simply don't let them open an account until they are out of school and have a full-time job (they will thank you for it once they graduate without having to pay off debt). If your student has a credit card, encourage him/her to order credit reports. Many don't realize the impact of their spending until they see their credit score drop.
Now that you have tips for teaching your kids about money, get your Credit Report and Score.