Talking about finances is never a fun topic. As one of the more touchy subjects that shouldn’t be brought up during Sunday brunch, it should be discussed with your children regularly. Whether they are 5 or 25, the naivety that comes with the money in their pockets can set the precedent for your child’s financial future. While a 5 year old who doesn’t have a care in the world is going to understand money quite differently than a 25 year old who has just moved into their first apartment, the values you can instill about their finances is what’s important. Even if you have never brought it up before, talk to your children today about managing money, saving for a rainy day, and making smarter decisions with their paychecks.
1. Wants vs. Needs
A young child doesn’t understand that their parents are paying a bill every month to keep the lights on. They don’t quite grasp the concept of gas being put in the car as a necessity to get to and from work. That’s okay – with your help, they will learn. From an early age, speak with your children about what is a want (that new toy, brand name clothes) and what is a need (groceries, a roof over their head). Teach your children to be content with what they have. Always yearning for the next best thing will only burn a hole in their (and your) pockets.
2. Save First, Then Spend
The notion that you should spend first and save what’s leftover is all too common. This idea doesn’t hold the person accountable for putting money away for a rainy day. Setting up an emergency fund is essential for having a stable financial future. According to a GoBankingRates survey performed in 2016, 35% of U.S. have only a couple hundred dollars in savings, while 34% have zero in savings. These numbers are astonishing considering how quickly you would need money if, say, your car’s engine died or you experienced an appliance failure in your home. Learning to stash money away from an early age helps eliminate the number of Americans who would be out of luck they needed a thousand dollars in short notice.
3. Stress The Dangers of Credit Cards and Loans
While it may be difficult to avoid taking out a credit card or applying for a loan at least once in your lifetime, emphasize the benefits of paying cash for high-ticket items. If a person is living a paycheck to paycheck lifestyle and cannot save up for a vehicle, they end up taking out an auto loan. Now something comes up (the engine light is on!) and the car has to be taken into the shop. Because of the paycheck to paycheck cycle, this person now falls behind on their auto loans and it has a negative impact on their credit score. Not to mention, interest rates make it nearly impossible to pay off credit cards and loans efficiently if you can only make the minimum payments each month.
4. Encourage Teens To Get A Job
As long as it doesn’t interfere with their studies, encourage your children to get a part-time job. Groceries stores and fast food establishments are great first jobs for young adults. While not the most ideal positions, these jobs teach discipline, time management and work ethic. Your children should know the value of a hard days work early on. Teach them the correlation between working hard and making money. When they receive their first paychecks, implement the other tips mentioned here to encourage good money management.
5. Be The Example.
Whether you notice it or not, those little eyes are constantly on you. Those little brains are soaking in every second, every action. Be the example that you want to teach your kids and be the change you want to see. Every time an impulse buy is made, your kids notice. Every time you take your family out to an extravagant dinner, they notice that, too. They also notice if you are frugal, minimalist, and budget to make every dollar stretch to its full potential. Teaching kids about money isn’t just about what they should do, it’s also about what they shouldn’t do.
No matter how old your children are, remember: you are the best role model for the little eyes looking up at you. Instilling good financial values sets your kids up for a better future, both financially and all around. Being in control of money will be the first step in creating the lives they’ve always wanted and reaching their goals without fail. Set the example and teach your children every single day.
What money tips will you teach your children?