As a parent, you have a responsibility to teach your child about the importance of money over his or her lifetime. Having a good set of financial skills can set your child up for future success and financial health. Teaching your child essential lessons about money as early as possible is a top priority. There are many ways to teach the next generation about financial health in an efficient and effective way.
Research has shown children as early as three years old can grasp the concepts of saving and spending money. This fact offers a huge opportunity for you as a parent to implement learning about money at an earlier age than you perhaps had considered. Studies have been conducted proving a child’s money habits start to form as early as age seven. You are the number one influence in your child’s life when it comes to his or her financial behavior. Your children can use guidance from you at every step of their life. Use this article to explore ways to educate your child about money.
Set an Example
As the parent you set the tone in your child’s life when it comes to his or her financial behavior. With this fact, it is imperative you and your partner set a positive example for your children. Their eyes are watching you and your behavior when it comes to finances. You will inevitably experience financial stress at some point in your life. It is important your strained behavior is not shown with your child present. Your child can pick up on your stress and echo that stress when it comes to money down the road. Likewise, make sure your child sees you balancing your checkbook, paying the bills on time and acting in a financially responsible manner.
This is a technique that has stood the test of time with families. Having a saving jar in your household teaches your children to save money efficiently. It is wise to use a clear jar for saving, so your child can see the visual increase of money in the jar as time passes. With a normal piggy bank, there is no visual for your child to understand the importance of saving. To further stress the importance of saving, you and your partner can talk about dollar amounts and the coins with your child as you put them in together. Urging your child to understand and be excited about saving money can encourage future positive behavior.
Avoid Impulse Buys
When your child gets to be a teenager, money becomes more of a day to day conversation. Teenagers are prone to asking parents for money to make impulse purchases. It is important to resist the impulse purchases as much as possible at this age. Encouraging your teenager to use his or her hard-earned money instead of yours is an important lesson. A good price threshold to measure by with this age group is $15. If the item is over $15, urge your child to wait at least a day before purchasing. This helps your teenager practice level-headed behavior by showing restraint. Furthermore, it is essential your child sees you and your partner practice this behavior as well.
Importance of Giving
Stressing the importance of giving is crucial at any age. However, practicing this behavior in front of your child as early as possible can promote future giving habits. A great way to practice this is by picking a charity, organization or church to give to regularly with your child present. This teaches your child that giving money is as important as making it. The idea is that your child sees how giving affects someone else, not just him or her. If your child is older, have him or her select a cause or charity to send a donation to each month.
When the time comes for your child to open his or her first bank account, it is your responsibility as a parent to explain the benefits and possible drawbacks of a bank account. This is a great lesson in responsibility. Teach your child about the implications and fees associated with over drafting. A simple bank account can take his or her money management skills to the next level, allowing you to relinquish some financial responsibility. Setting up a simple bank account for your child helps him or her to prepare for a larger, more complex bank account in the future.
This bank account can be used to help your child start saving for college, as well. Encouraging your teenager to put a small portion of his or her paycheck into a savings account can help your child immensely. This helps your child contribute to his or her own college education, teaching that hard work can pay off.
Once your child is old enough to understand the fundamentals of money, it is important to teach a lesson in budgeting. In this day and age, most children understand better through technology. Fortunately, there are budgeting apps available for you and your partner to research to help your child learn budgeting tips and tricks. A lot of available budgeting apps allow you, as a parent, to monitor your child’s budget through family budgeting accounts.
Family budgeting accounts encourage transparency around money and offer you visibility into your child’s accounts and spending habits. There is no time like the present to get your teenager prepared to budget appropriately, no matter how small his or her income is currently. Your child can learn valuable lessons around planning for his or her money while living with you. Take the time now to encourage your child to ask questions about budgeting and walk him or her through the steps of creating a simple budget.
Credit Card Danger
By the time your child is a teenager, it is likely he or she knows about the advantages of a credit card. As soon as he or she turns 18 years of age, he or she may be swarmed by credit card companies offering compelling promotions for opening an account. It is important to explain the dangers of obtaining a credit card and using it recklessly. Having the conversation around debt before your child turns 18 years of age can establish a baseline for your child to make a positive decision when it comes to obtaining a credit card.
Related Article: Creating a Family Budget