Teaching Your Kids Money Management

by Jessica Sommerfield · 0 comments

Money is getting into the hands of teens and children at a younger age than ever before. Beyond allowance from parents, kids are gifted money for birthdays or Christmas and earn it for doing chores and part-time jobs when they are old enough to work. With this trend comes the increased concern that kids are handling money before they are taught how to handle it wisely, or are never taught at all. Considering the major pitfalls that can result from financial ignorance or irresponsibility, it’s vital to ensure children are being taught how to manage money at an early age. Besides making money management a regular topic of conversation with your children, here are some ways to help your kids grow up to be financially responsible adults.

Don’t assume they’ll learn money management in school. Kids are taught mathematics and economics in school, but one element which is largely omitted is personal finance. Even if they are taught the basics of budgeting, loans, interest, credit rates, and investments, these concepts are often much the same to them as the algebra they find no practical application for. Children and teens need their parents involved in helping them apply financial concepts to their everyday lives, both in the present and the future.

Teach kids responsibility by giving them opportunity to make financial choices. Kids aren’t going to be deciding whether or not to delay bill payments in order to buy a flat-screen T.V., but they can learn to make choices and deal with their consequences on a smaller scale. If they have a set allowance or, in the case of the very young, a handful of quarters for the candy machines, let them experience the reality of spending all of their money. Parents who offer their kids a bottomless money bag aren’t doing them any favors; when they’re adults, there won’t be anyone to bail them out of their financial blunders.

Rather, the experience of learning to make choices with a set amount of money will teach them to value their purchases, learn their priorities, and instill a respect for delayed gratification, all of which will make their future financial management less catastrophic. Poor choices made by an 8-year-old are much easier to learn from and correct than the debt-racking and credit-score-dropping mistakes of a 20-something.

“Do What I Say, Not What I Do.” Whether or not you are actively teaching them, your kids are learning volumes from you every day, simply by watching what you do. It’s fruitless to teach your children financial responsibility if you’re not practicing it yourself and giving them a living, breathing example of how it plays out in the ‘real world.’ This doesn’t assume you will always make the right choices or be the perfect example of wise financial practices; we all make mistakes and have financial scars in our past. The important thing is to communicate with your kids about your own financial decisions, both good and bad, and how they have affected your life.

Your kids look to you, more than anyone else, to teach them how to be financially responsible. Even if they won’t always agree with your practices, you will be instilling in them principles which will allow their success in multiple areas of life.

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