Did you study tax preparation in school? Or how to make a budget? Have you studied how credit cards work? Some students are learning at least some of these things because 22 states mandate high school students to take an economics course. Even an economics course, however, does not go into detail about how to manage your personal finances.
And it’s crucial: youngsters who take a personal finance course are more likely to save, pay their bills on time, and avoid maxing out their credit cards or carrying credit card debt as they get older. To put it another way, understanding about personal finance from a young age is an excellent method to instill healthy financial habits later in life. How do we teach our children what they require?
Keep reading to learn how you can set your child up for success. Remember too that they learn by watching. If you are drowning in debt, consider filing for bankruptcy to get the help you need. You can contact Law Offices of Terrence Fantauzzi at (909) 552-1238 to request a legal consultation.
Give them an allowance at a young age
Giving children an allowance is a terrific approach to introduce them to money and money management. It can be insignificant — a couple of dollars a week is a significant sum for a kindergartener. Discuss what money is and what it is used for with them.
Explain to them that they have the option of saving money up for something huge or buying something small right away, and that the choice is theirs – but that they won’t get any more until their next planned allowance. This teaches children that money is limited and valuable, and that they must consider their choices carefully.
Consider taking your children to open a savings or checking account when they get older. Many banks will allow you to open an account with just $25 and no fees. You can explain to your child how banking works and how to deposit and withdraw money from an account. This could also be a good moment to start practicing good debit card habits, such as keeping track of how much money is in your account to avoid becoming overdrawn.
Teaching money management to kids in high school and middle school
As children grow older, they will be better equipped to understand crucial personal finance ideas and develop sound financial practices. Maintain the allowance so that they are forced to deal with money management on a regular basis. You can also begin discussing other financial difficulties with them, such as paying bills, obtaining loans, and so on. We are frequently hesitant to discuss money with our children, although it is an excellent learning opportunity.
Because many teenagers begin working in high school, you can use this time to help them establish a budget (and, if they don’t already have one, a bank account). Don’t be scared to let them fail if they don’t stay to their budget. Not being able to buy a movie ticket with your pals is a terrific motivator for remaining on budget in the future – and it’s better to learn that at 15 than when you’re 30 and can’t pay your mortgage.
Consider bringing your youngster with you when you go to buy a car or rent or buy a new home. Allow them to observe the process and learn about down payments, security deposits, interest, and other important parts of those large purchases. You’ll be delighted your child has had the exposure and experience to make wise financial decisions by the time they’re ready to leave home and rent their own house or take out student loans.
Think about credit cards
In the hands of a teenager, credit cards might be harmful because they don’t necessarily have the best impulse control. Getting them a credit card early on, however, is an excellent method to begin developing a credit history, which will make their financial future much easier. If you do decide to get your child a card, make sure you talk to them about how it works, why they need to pay on time and in full, and that the card is their responsibility.
Be aware that they may get off course and be unable to pay at some point. You’ll have to choose between covering the difference and letting them deal with the credit ramifications (and interest payments) on their own. That will solely be determined by what you believe is best for you and your child.
Consider money management courses
Taking a structured lesson is one of the finest methods for your children to develop excellent financial habits. Encourage them to take one if their high school or middle school provides one. This type of session might address topics that you would not encounter in your daily life and include activities and exercises to help you understand fundamental financial concepts.
Consider enrolling your child in a personal finance course if there isn’t one available at school. You can discover a variety of resources (many of them free) online, and you might be able to find a class at your community center or local college.