RAISING FINANCIALLY SAVVY KIDS
lesson: Kids learn reading and arithmetic in the classroom. They learn
sport, and a sense of fairness, on the playground. But surveys show
that kids learn everything they know about money from their parents.
Precisely when they learn about earning, saving and spending is difficult
to pinpoint, but as a parent, it’s within your power to raise
financially savvy kids if you follow your common sense and these tips:
Create a sense of responsibility.
Your earliest exchanges with your children on the subject of money should tie goals to a plan of action for achievement. Most experts agree that once you provide your children with the means to money — through an allowance, family gifts or chores around the house — they need to have the freedom to decide what to do with it. Otherwise, the lesson on responsibility is lost. They also need your guidance to help them consider worthy goals. You wouldn’t give your teenagers the keys to the car without first teaching them how to drive. Responsible financial habits require the same learning process.
Be open about family finances.
A generation ago it was unthinkable that children should be privy to information about the family budget but then again it was also a time when no one ever spoke about drug use or a bunch of other difficult subjects with their kids. However, if you include your children in the budgeting process, they will develop a sense of the tradeoffs that you must make in everyday life. Should we take a modest vacation and put extra funds toward a sporty family car? Should we make do with the old clunker and opt for an expensive getaway? When children participate in the decision-making process, they are less likely to feel entitled — or deprived.
Encourage savings through personal example and incentives.
Children are like sponges. They soak up everything that goes on around them. They’re also quick to point out inconsistencies in what their parents say versus what they do. It’s no surprise, then, that the notion of saving is likely to remain foreign unless it is supported by “walking the walk.” One of the best ways to do this is by sharing a special goal. You can demonstrate the power of putting away a certain amount of money each week, track progress toward the goal, create excitement then share the joy of achievement when the goal is met.
Turn mistakes into valuable lessons.
Everyone has done it: blown a little too much on a big purchase, gotten in over their heads - as the saying goes, “sadder but wiser.” When your kids do it, help them learn from their mistakes. If your son squanders his allowance on day one, suggest some strategies for making it last come next pay day. Don’t scold him — you’ll only make him reluctant to discuss his money issues with you down the road. Don’t advance him extra money in between. He should feel the pinch. Better yet, if you can see the mistakes coming, try to intervene. It’s usually easier to avoid a disaster than to pick up the pieces after the fact. Don’t use money to play “gotcha” with your kids. The learning experience should be positive - and forgiving.
Teach the proper use of credit
Robert Kiyosaki, author of the best-selling Rich Dad, Poor Dad, believes that a child’s attitude about credit can determine whether he or she grows up rich, middle class or poor. Before you decide how you will approach the issue of credit, look at your own habits. They will probably influence your children more than any other thing you say or do. Whatever you do, it’s important not to back away from the issue. For teenagers, one suggestion is a secured credit card through a bank. After a couple of years of responsible behavior, most teenagers are ready to graduate to an unsecured card.
Money - Teaching Tools:
allowance is one of the best ways to teach the skills they
will need to manage their money. Below are the most common questions
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