As you may have learned, making bad financial decisions when you're young can affect your life for years to come. On the other hand, making good financial choices early makes it easier to do important things like buying a home. It may seem hard to teach your kids about things like budgeting, but without that solid foundation, navigating their finances will be harder when they're grown up. Teaching your kids the value of a dollar now - and providing them with tools to manage their own finances - can help set them up for a lifetime of success.
Here are some tips to consider for helping your kids learn about finances from Vanderbilt Mortgage and Finance, Inc.
1. Practice saving habits
One thing kids can learn is how everyday actions add up over time. Not everything they take for granted is free, and because you have to pay for things like electricity, heating and water, it's best not to waste them - both for your wallet and the environment. Model and explain behaviours everyone can do that save money:
* Turn off lights when leaving rooms
* Decrease water usage (not letting the faucet run while brushing teeth, for example)
* Turn down heat at night or when leaving the house
2. Teach delayed gratification
Learning patience is an essential part of growing up. As an adult, you wait for paychecks, and to save enough money to buy things you need or want. Kids who can work toward a future goal or reward will be more successful in school, with their finances - and in their careers.
* No in-app purchases - It's tempting to fall for offers for add-ons while playing games, but kids need to learn to resist impulses and plan ahead if they want something.
* Only purchasing on certain days such as birthdays, holidays or allowance days teaches self-control, patience - and the fun of anticipation!
Knowing the difference between needing and wanting things also goes a long way toward developing good spending habits.
3. Manage a savings account
When kids are young, they can learn to save money - ideally in a clear container so they can see it grow. When they're older, kids can learn how to keep track of a real bank account, with your help. As they grow, they will learn not only that their savings increase, but that a bank account may allow them to earn small amounts of interest, building up savings even more.
4. Help them earn
Even if you give your kids an allowance, you can also offer opportunities to earn by doing extra chores. When they're old enough to get jobs like babysitting or lawnmowing, help them keep track of what they earn and plan for the future - like setting aside money for college.
Today there are multiple apps to help kids track chore or allowance money, budget and save toward goals.
5. Teach big picture principles
Discussing money can help kids understand how the world works, protecting them from making mistakes when they're on their own. Kids should understand that your income helps to pay for your home, car, utilities and food, and that credit cards aren't free. Explain how credit cards charge interest, so you shouldn't spend more than you can pay off each month.
It's important that kids learn how good financial habits help you build a solid credit score, so you'll be able to make major purchases later, like buying a home. You can explain how buying a home is a long-term investment that's important to your family's stability.
With these tips, and keeping to simple, straightforward explanations, you should be able to help your child learn how finances work, and what they can do now to learn good habits that will be with them for years to come.