The Importance of Teaching Your Child Smart Financial Habits

The Importance of Teaching Your Child Smart Financial HabitsWhile very few people really want to live for money, most would admit that it holds a very important place in the world.

With money, people provide for their families, find ways to relax and care for their bodies and minds. They bless their friends and relatives with gifts, take memorable vacations and choose trustworthy transportation.

It is how you are rewarded for a job well done and how you support causes that are important to you. However, how you treat money as an adult often has very distinct traces back to how you were taught about money as a child.

Perhaps you were taught very little about it, rarely had a chance to experience spending it and were never taught about saving and investing money. In any of these cases, you may have formed a very tenuous relationship with money and may not have felt confident in your handling of it.

You can change all this for the next generation by ensuring that your own children know how to deal with money wisely, from earning it to spending, investing and saving it.

Saving for Big Purchases

This is one of the first lessons that you will want to teach your children. By the age of four or five, they should be able to understand this concept. When they go to the store and want something big, explain to them how much it costs and how much money they will need to save before they are able to purchase it. Encourage them to wait for the good purchase rather than settling for something they will not like as much. This will teach them how to save for even bigger purchases in adulthood, such as vehicles, computers and houses, and will teach them self-control over impulse purchases.

Earning Money

You might ask yourself, “Should I pay my kids allowance?” If so, consider that children who do not earn any money will not be able to learn how to work with it wisely. When your children are still young, start giving them allowances, and gradually increase their allowance amounts as they grow older. An allowance will most likely be their first major experience with making money work for them and will teach them how to manage their money when they are making even more, such as with their first jobs.Instead of letting them spend all of their allowance, have them save a percentage and have them donate a percentage to a favorite non-profit organization to teach them about those who may not have as much as they do.
” Kidsgoals guest writer Dixie Somers recommends checking out BusyKid if you’re looking for an easy way to manage your children’s allowance.”

Wise Investing

Believe it or not, you can teach your children about investments from an early age even with a simple bank account. Take your child to a local bank or credit union, and help them to open up a savings account that allows for limited withdrawals. As they get older, explain to them about compound interest, showing them how the earlier they start saving, the more they will have when they get to a certain age. In the teenage years, you can even begin discussing other forms of investing, such as using money market accounts or certificates of deposit. This will get kids ready for the real world where they will make investment decisions that affect their retirement options.

Staying out of Debt

Debt is a huge problem in America with the average American family holding over $7,000 in credit card debt. Show children your household’s budget and explain to them how you cannot spend more than you make. Teach them how to use credit cards correctly, such as by never putting more on the card than you will be able to pay off in full each month. Help your children draw up their own budgets when they get their first jobs. This will help them learn how to be in control of their own money.

Your outlook on money often affects your outlook on the world. When you work wisely with your money, it begins working for you, and you feel calm and secure. However, when your money is running out or you are in debt, you may feel anxiety and distress. You have the ability to change these feelings for your children by teaching them now how to treat money so that it does not control them. By teaching your children how to have smart financial habits now, you are setting them up for decades of success later in life.

Article by Freelance Writer Dixie Somers

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