You may be providing for your kids now, but not far into the future they will be earning their own money and will need to know how manage their finances. Start by teaching your kids the following concepts now and they’ll thank you in the future.
1. Money doesn’t grow on trees When your kids start nagging you to buy things, that’s when you teach them that you don’t have an unlimited supply of money. When they reach an age where they can understand this concept, you can also explain to them where it comes from. It’s important to teach your kids while they’re young that you have to work for the things you want. 2. Priorities first One of the most valuable lessons you can teach your kids is that what they want is not always what they need. Encourage them to prioritize the items they want, and teach them that they don’t always need all of the latest toys. Making distinctions between what they want and what they need is key to budgeting. 3. Save Save Save When you give your kids some pocket money or an allowance, do they immediately run to the toy store? Kids tend to spend every penny they get on the first thing they see. A great way to educate them about managing finances is to teach them about making calculated decisions. You can explain to them that if they save a few months worth of allowance, they can buy that new video game they’ve been asking you for, or any other bigger item on their wish list. There are variety of popular kid book series about investing available and with the help of those books you can easily teach your kids about money management and the importance of saving. You can encourage them to save by putting money in a piggy bank, or having two jars for ‘now’ and ‘later.’ This will help them understand the concept of putting away a set amount of money each month- a very valuable lesson for future household finances.. As your kids get older and their ‘later’ jars fills up, take them to the bank and open up a savings account. 4. Allowance You may wonder why it is important to give your kids allowance even though they aren’t contributing to the family income. Giving allowance actually proves to be educational for kids. It helps kids understand and learn what they should be spending money on, and how to save money to buy things they really want or need. Pro tip: set a time or date that you’ll give them the set allowance (i.e weekly, monthly, or at the beginning of each month). This way they’ll also learn to plan accordingly. 5. Write it down Knowing where your money is going is an essential step to managing your finances. Encourage your kids to get into the routine of writing down how much they spend and recording where the money is going. This will also help parents keep track of all of the small pocket change you give to your kids. Pro tip: if you’ve set a budget limit for the month, make sure the expenses never exceed this number.
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Most parents try to teach kids the life skills they’ll need to thrive as adults. Some of those skills relate to money and work ethic. Sadly, particularly in affluent communities, children are often sheltered from the responsibilities and realities faced by adults. The percentage of high school-aged kids who work is at an all-time low, declining to 20% in 2013 from 45% in 1998.
The popular kid book series about investing that I recently read outlines some of the reasons explaining the importance of saving and investing for kids. One reason that resonated most with me is that it teaches them “grit”, also known as perseverance. They are going to have mean bosses, unfriendly co-workers, non-ideal work schedules, but they need to learn to show up on time, be respectful to bosses, co-workers and customers and do their job, even if it’s drudgery. These are all skills they need to learn to thrive in the real world and will serve them well, whether in college or on the job. Secondly, the money earned from these part-time jobs can enable them to take on a larger portion of their own spending decisions, whether it’s paying part of the expense of having a car or being in charge of their entire clothing budget. It can enable them to do more things they might want to do like go to the movies or a concert. It can give them resources to put towards future goals like college or buying a car. The point is that by the time our kids leave home, they’ve had lots of practice managing ever more spending and saving decisions. It’s better to have them fail in small ways while they are still under our watch than to launch them unprepared into the big wide world and have them fail spectacularly. A final reason why having a part-time job is important is that because it has become somewhat uncommon, it can actually be a distinguisher on college applications. Many families fear that working part-time will look bad on college applications or have a negative impact on grades. However research shows that there is actually a positive correlation between work and grades with up to 15 hours of work a week. Furthermore, because so many families enable their children to be on travel sports teams and do voluntourism trips to developing countries in the hope of making their child attractive to colleges, these things no longer distinguish children as much as they used to. Raising our children to be successful adults is one of the most important things we can do as parents and encouraging our children to have part-time jobs is a way to teach them grit, how to manage ever larger sums of money and maybe even help them get into college. Whether we like it or not, finances control almost all of our day-to-day decisions. From the moment we wake up and turn on the light, we are subconsciously deciding it’s important to spend money on electricity. Even as we sleep, the heater or a/c unit are keeping us at a comfortable temperature, as well as racking up the utilities bill. As adults, we know how much money controls our lives. But what about our children? What do our kids know about budgeting, saving, or paying bills?
Researchers at the University of Cambridge reported that kid’s money habits are formed by age seven. And most children are able to grasp the idea of saving and spending as early as age three. Children are very aware of their surroundings. They understand the concept of spending very quickly. But what about saving? Have you taken the time to teach your children how to be financially smart with their money? It's never too late. Teaching kids about money is essential for their future success in all aspects of life. Getting the money conversation started is not always easy especially in today’s world where increasing consumerism and e-commerce demand the knowledge of financial literacy. Here are 8 financial lessons you should teach your children before they head off to college: 1. Let your children see real cash. We live in an age where everything is paid for with credit cards or online. This can easily give children the wrong idea that a little plastic card will let them buy whatever they want. Give your children a few dollars and let them decide which fruit to buy at the store. Or take them to the bank with you and help them understand that the bank is keeping your money safe for you. 2. Let your children handle their own money. Give your children a chance to receive and spend their own money. Whether you decide to give them an allowance or make them work for their funds, this will give your children an early opportunity to understand the consequences of their decisions. You can also give your kids a see-through piggy bank so they can see their money and be aware of how much they have. 3. Teach about the importance of saving and sharing. While most kids grasp the concept of receiving and spending right away, it’s vital to emphasize the importance of saving and sharing as well. It helps if you have a jar for each category so your kids can see how much is in each one. Teach your children about the difference between buying something small now, or saving their money for something they’ll really love in the future. And it might also be fun to let your child decide where to share their money. Help them save 10% of their money (or however much you prefer) to be used to help someone in need. They can give it to a homeless shelter, donate it to your church, or help a friend in need. 4. Encourage them to set goals. Have you ever wanted something expensive and had to work hard to earn it? Working hard to achieve a goal is a great opportunity for your kids as well. Help them create a “dream board” and encourage them to put a picture of what they want to buy on the board. This will help children learn delayed gratification. It’s also a great practice for saving for big things like retirement or a car. 5. Let your children make mistakes. It’s ok to let your children waste their money on something you know won’t last long, because it might teach them a valuable lesson. Teach your children that they have to live with their choices. And don’t bail them out if they want something they can’t afford. Let them know how much money they still need to afford whatever they want and help them come up with a plan to work towards obtaining the necessary funds for it. 6. Teach them to budget. When you feel like your children are old enough, encourage them to write down what they earn and spend. This will help them understand where their money is going. If your children beg for something they don’t have enough money for, don’t give in and buy it for them. Help your children figure out how to earn that money on their own or you could give them a “loan” and let them pay you back with monthly payments. 7. Talk about your family finances. Don’t just tell your kids that you can’t buy something or can’t afford to go someplace. Explain to them how everything costs money. Help them understand why you might not be able to afford to send them to basketball camp because you still have to pay the rent, utilities, insurance, phone bill, taxes, groceries, etc. Work together as a family to find room in the budget for things they might really want or help them get a job to assist in paying for some of the expenses. 8. Teach your kids about credit. Credit is an important part of our financial culture. Too many kids grow up with little to no idea how credit cards work. Once they get a taste of spending money freely with a credit card, it’s hard to stop and, before they know it, they’re up to their necks in credit card debt and student loans. Teach your kids how to build their credit score and maintain a healthy credit card balance before they leave home. We’re raising the next generation of financial experts. Let’s help our children get a jump start on their finances by teaching them how to take control of their finances now so their finances don’t take control of them in the future. April is Financial Literacy Month in the United States. The month initially started with a focus towards financial education for children and has now shifted to provide resources for people regardless of age. Let’s learn more about financial literacy, why it’s celebrated, and how to get your children involved.
What is financial literacy? Financial literacy is possessing the skills and understanding to make good financial decisions. When you understand your money and personal finance even at a very basic level, you make better choices. Financial literacy continues to be a focus and now is even becoming more prominent in schools. For many years, financial literacy was not taught or focused on unless it was done in your home. Now the true importance of financial literacy is becoming increasingly clear. Why is Financial Literacy Month celebrated? Financial literacy month began to be celebrated as a way to raise awareness and increase the focus on financial education. In 2004, the US Senate turned Financial Literacy for Youth Month into National Financial Literacy Month to promote events and educational information around money and getting out of debt. Today, many non profit companies and even some for profit companies continue to recognize Financial Literacy Month in an effort to provide resources and help the community better understand their finances. According to NerdWallet’s study, the average credit card debt in the US is $6,929, the average student loan debt in the US is $47,671, and the average car loan debt in the US is $28,033. Even using just this survey, there are tons of people in the US who could benefit from additional financial education and knowing that they have the power to change their financial situation. As Dave Ramsey says, “if you’re the problem, that means you’re also the solution”. You should find comfort in knowing that you have the power to take control of your situation and change it. A new study by Salary Finance found “half of US Workforce Suffers Panic Attacks and Depression Due to Money Worries.” By taking control of your money, you can take back your life. How can I include my children in Financial Literacy Month? Children pick up a lot of financial habits from their parents–whether you think they’re paying attention or not. It’s a good idea to start being aware of the things you say about money when your kids are around. Do you tend to use money as an excuse for why they can’t get that new toy? Maybe instead shift the focus to talking about needs versus wants or even talk about budgeting. If you focus on the budget, instead of your kids hearing “we can’t afford that”, they’ll hear “that isn’t in our budget.” The message on the surface is very similar, but when you dive deeper, the second response sounds like you are making a choice for the family and the first sounds like you’ve got no choices available to you. Now that’s a little bit of an exaggeration, but regardless of how much money you truly have it might be better for your kids to feel like it is a choice within your control. As your kids get to be school aged, it can be helpful to introduce the concept of your money doing 3 basic things: give, save, spend. You can set them up with envelopes, cans, or jars for each purpose and help them understand the importance of each category. Then as holidays or their birthday comes around, remind them that some needs to go in each category. For the give money you can help your child understand the importance by talking about what some local charities do. Popular charities for children often help animals or other children in some way, but you can also pick a charity that is important to you and help your child get involved. Teaching kids about money is essential for their future success in all aspects of life. Getting the money conversation started is not always easy especially in today’s world where increasing consumerism and e-commerce demand the knowledge of financial literacy. Is there anything special available for financial literacy month? Yes! As a special bonus in honor of Financial Literacy Month, Big Picture Budget’s 1 hour Financial Makeover Course is discounted to $25 with coupon code 20WEB. This course is designed for beginners who don’t know much about money. By going through this course and implementing the steps, you’ll go from clueless about money to budget pro in under 30 days. When you complete this course you’ll get information about budgeting, debt, and how to be successful as well as your very own budget template with instructions so you can create your own budget to help you work to achieve your financial goals. Whether or not you celebrate Financial Literacy Month in April, it’s important to recognize the overall impact money has in your life. Taking the opportunity to gain education and learn more about your money and how you can use it to achieve your goals. Learning is never ending and it’s important to teach your kids and yourself about money. |
AuthorHi! I am Tim Connolly and I am providing help to parents to bring up their children in a healthy environment. I am working in this profession from last 5 years, if you have any query regarding this please contact me. Archives
June 2021
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