Knowing how to manage your personal finances is a key life skill. Good financial management means that your bills are always paid on time, and you do not run the risk of entering the red and putting your assets at risk – not the mention the wellbeing of your family and yourself.
As financial aptitude is not innate, teaching your kids early on how to handle their money provides them with the skills and life lessons needed to ensure that they remain financially stable later on in life. Here are some ideas for teaching your kids how to handle their money.
Involve them in budgeting
You’ve probably been there: having to refuse your kids the latest designer sneakers in favor of a cheaper pair. Provide your children with the additional explanation that you are unable to afford an expensive pair as the money would be better spend on household necessities like bills; this will demonstrate a sense of financial responsibility to your kids and will help them realize that you are not simply being mean in refusing their request. You could take the life lesson further by involving your kids in budgeting, for instance, having them assist you in coupon clipping and comparison shopping and explaining that these tasks help you to save money as a family.
Set up a checking account
As your kids get older – from the age of around 13 – they might be ready to take on some responsibility for their own finances. This is especially important as this is around the age that many kids get their first part-time jobs and prepare for budgeting when they go off to college. Opening a free checking account specifically designed for teens provides them with the financial responsibility of depositing their money into an account whilst also making it easy for them to keep a careful watch on what is going out of their account and exactly how much they are spending.
Set up a savings chart
Kids often find it hard to consider the future, seeing only the instant gratification of a purchase. One way of teaching your children about saving for the future is to set a fun family savings goal, such as a trip to Disney, and record your journey to success on a savings chart. Demonstrate to your kids the benefits of abstaining from unnecessary expenses in terms of your long-term goal. For instance, having a film night at home with a bag of microwavable popcorn instead of an expensive trip to the cinema will free up some money for Disney.
Set a good example
Kids learn many of their life lessons from the examples set by their parents. Then, it stands to reason that if you struggle with your own financial management, your children will also do the same. Try to refrain from impulse buys unless as a special treat, and always pay bills and buy household necessities a priority. Place any money left over at the end of the month in a savings account.