If you don’t teach kids how to maintain their finances, then they won’t. One reason the rich keep getting richer is because they teach their children to invest money and reap the benefits. So, teaching your children how to manage money and balance debt is quite important when you are a parent. The downside is that children do find money management boring, so here are some tips to teach them.
1. Value of Money
Of all your financial teachings, this is the greatest one you can give your children – the value of money. Money is earned through hard work and is not in abundance. Pocket money for household chores is the most basic thing. Only hard and smart work gains money, nothing else.
2. Managing Money
Using the pocket money they have, teach them how to manage it. While some children will be tempted to spend all the money, you must show them how to spend, save and invest. The big question is how to teach them to save and invest? Give the correct motivation. Is there a large expense they want, like a cycle? Well, ask them to start saving for it? Similarly for investing, by teaching them that they can double their money easily without any hard work is always a great motivator.
3. Gift a Credit Card
Give them a credit card by the age of 10. Building credit history early on will benefit your children in the future. More importantly, they get hands-on-experience on using money they don’t have, paying it back, and keeping the debt under control.
It is advisable that you keep a strict control of the credit card and refuse them when you need to.
4. Talk and Review
And apart from all that action, ensure you sit down and talk to your children about managing money. Review their decisions and explain to them why you refused them. It would be unwise to hope that they pick up ‘hints’, so don’t do it – just teach them directly.
5. Role Model
You are the person they will learn from the most, so be a role model. When you pay the credit card bill, or go through your credit report, do so with your children.
At every step of the way, be sure to involve your children in your own financial activities. A lot can be learned from just observing. Furthermore, this also makes them comfortable with handling money.
Teaching kids about handling money and debt can be a challenge, but it is something they will be very happy to learn. Use these tips and get it right.