Money Matters: 6 Tips to Get Your Kids on the Right Financial Track
You should never say that it is too early to start teaching your kids about the significance of money, saving, and finance. Here are 6 tips to get your child
“Tell me and I forget, teach me and I remember, involve me and I learn.” Benjamin Franklin.
In no account should you say that it is too early to start teaching your kids about the significance of money and saving. We know that most kids believe that cash grows on trees like mangoes or oranges. However, with the right guidance and involvement, your kids can be able to learn vital life lessons about budgeting, saving, and investing. Getting your kids on the right footing on money issues will help them a lot in their journey to becoming responsible young adults.
Even little kids can save too
It’s never too young for children to start learning about finances. So, you should start teaching your kids about the concept of money as early as you can. I know it’s hard for small kids to understand the idea of dollars and cents, but they can learn the importance of saving that early. Use stickers and stamps as well as dollars and coins to reward your kids for various tasks they carry out in the house. These tasks can range from feeding their pets to good behavior. Let them accumulate rewards for every task done and once they have accumulated enough rewards, you can buy them a big prize.
This saving lesson teaches your kids that they have to save their smaller rewards first in order to get the bigger reward (a more valuable prize).
However, the most valuable lesson that your kids need to learn from all this is to know that once the rewards they had saved are gone, they need to save up more so that they can earn the next price, which is more valuable.
As you kids continue to grow and take up more responsibilities, you should come up with a list of household chores for them, and once they have completed them, you should pay an allowance. Giving your kids an allowance is important as it provides a financial incentive to the kids. They learn that once they are accountable for their actions, they will get a reward. In addition to helping you get some of the jobs around the house done, this program also provides your kids with a sense of accomplishment once they have completed their chores and gotten their rewards.
When giving your children their allowance for the work done, consider doing so in denominations that will encourage them to save. For instance, when your kid earns an allowance of ten dollars, give him 10 one-dollar bills instead of a ten-dollar bill. Persuade them to save at least two dollars from every ten dollars they earn. You can also give them a reward when they choose to save their money.
Open an account for them
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Take your kids to the local bank and open either a checking or a savings account for each one of them. When you open a savings account for your child, he or she will be able to learn how interest accumulates as a reward for saving money. A big number of banks offer savings account for students and every dollar saved there earn interest. Opening a checking account for your kids will help you teach them how to balance a checkbook at a tender age.
Another important account for kids is the 529 account, which is a college savings account. This account gives your children a chance to start saving for college at a young age and once they reach college going age, they are entitled to a big windfall.
In this plan, you encourage your kids to save by giving them an incentive. Under the family 401(k), you agree to double your kids’ savings up to a certain amount – that is for every dollar they save, you add another dollar to their savings. In addition to encouraging the children to save more, this plan also protects them from getting discouraged when they think that it might take them a long time to save a considerable amount of money. The plan is very helpful especially when your kids want to buy a costly asset like a car.
Set spending goals that are realistic
We know that kids will want the latest video game and other items that are expensive. If they do, help them to set a realistic target of buying that item on their own. Help them to come up with a budget and a practical timeline to save enough money for purchasing the item.
When your kids start setting spending goals from a tender age, they will know how to manage budgets once they enter college. They will also be well equipped to budget for monthly rent or mortgage, utility bills, vehicle loans, among other expenditures – later in life.
Teach them about credit cards
Teaching your kids about the drawbacks of credit cards at an early age is very necessary. However, it is not advisable to discourage them from having credit card accounts. Teach them that building a great credit history from a young age will be very valuable later in life when they will want to buy a major investment, such as their first home. Once your children become young adults, encourage them to build a solid credit history by responsibly using credit cards instead of cash. However, they should have enough money in their accounts to pay, in full, the credit card bill. Discourage your children against reckless use of credit cards by letting them know that credit cards are not a way to access free cash.
Use everyday learning experiences to teach them about managing finances
When life presents an opportunity for you to teach your kids about budgeting, saving, spending or investing, make sure you take advantage of it. For instance, if you are planning a vacation for the family, sit with your kids and take them through how a vacation is planned and how it is paid for. With every investment or purchase you make, there are valuable financial lessons that you can teach your kids.
Disclosure: The information provided by The Financial Genie is for informational purposes only. It should not be considered legal or financial advice. You should consult with an attorney or other professional to determine what may be best for your individual needs. The Financial Genie does not make any guarantee or other promise as to any results that may be obtained from using our content. No one should make any investment decision without first consulting his or her own financial advisor and conducting his or her own research and due diligence. Additionally, some of the organizations with products on our site may pay us a referral fee or affiliate commission when you click to apply for those products.