May 18, 2021
Whoever said, when it comes to kids, “the days are long, but the years are short,” got it right. Time flies, especially when you’re trying to prepare them for important life milestones and personal independence. This is just as true when it comes to money management.
Whoever said, when it comes to kids, “the days are long, but the years are short,” got it right. Time flies, especially when you’re trying to prepare them for important life milestones and personal independence. This is just as true when it comes to money management.
It’s never too early to begin tackling important financial literacy topics, because, before you know it, your kids will be grown, managing their own money and facing financial challenges like credit and debt on their own. Here are 8 money lessons that will help you prepare preschoolers to teens for a healthy financial future.
You’ll rarely encounter anyone with more urgent needs than a young child — or at least that’s what they believe. Very young children can often feel like every “want” is an emergency and waiting for anything will be the end of the world. If you’ve ever taken your child to a grocery store and stood in line beside the rows of candy bars or toys at the check-out, you may know this first-hand.
That’s why this is a perfect age to begin teaching your kids the importance of delayed gratification. Not only will this save you headaches at the store once your preschooler gets used to you hearing “not today” when they ask for a toy, but it will also save them a lot of financial headaches when they become adults.
As adults, the temptation to spend on items we may not need can be intense, especially with easy access to credit cards and lines of credit. Believe it or not, you can start teaching your kids at a very young age to plan ahead and save for what they want. Try starting a savings jar for them and begin to talk about the difference between wants and needs. Keep your explanations simple and consistent. The difference between the strong need they’re feeling to buy a toy versus the need to spend on essentials, like food and clothing, can be difficult for young kids to understand at first.
By the time they reach school age, kids have years of experience seeing you make purchases, but that doesn’t mean they understand the value of money, or the seriousness of debt. This is especially true in our increasingly cash-less society. Kids see adults using credit and debit cards, but may not understand the impact of credit on your finances.
At this point in their lives, a good strategy for teaching kids about money is to use cash. Many financial experts say that there’s a more emotional connection to cash — that the impact of giving away and getting less in return (or none back at all) can help drive home the effects of spending.
With more capacity to do long-term planning at this age, it’s a good time to talk about your values concerning money in general. Is saving important to you and your family? What about giving? Does the value of a hard day’s work plan into your values and the concepts you want to teach your children?
Whether you help them set up their own savings account or create savings jars at home, now is the time to introduce your child to budgeting. The sooner you teach kids how to create a simple budget the better. As their finances become more complex, they’ll already be in the habit of using a simple budget spreadsheet or budgeting app.
However your child “earns” money — doing chores, helping a neighbor with yard work, or receiving gifts of money from birthdays or holidays — decide together how much money in their budget will be allocated to spending, savings and giving. Continue the wants vs needs conversation. Teaching kids to save ahead for a larger item can help them become mindful spenders. Positive spending habits will help your child avoid overspending and too much debt as an adult.
In their teen years, your children are on the brink of financial independence and nearing the phase of their lives when significant costs and spending opportunities are going to come up. They’re also approaching a point in their life when costs and debt can add up quickly. Encourage as much open and honest communication with your child about money as possible. Discuss the potential costs of college or university, owning a vehicle or traveling. Give them the opportunity to plan ahead by being honest about what you are willing and able to contribute and what will be your child’s responsibility.
The teen years provide parents with an important window to teach their kids how to be responsible earners. Encourage your child to pursue a part-time job so they can learn to budget their income wisely. That first part-time job also introduces them to the sometimes-tough realities of work: a job may pay less than they need, and the work isn’t always reliable. Now is a good time to have a discussion about how to prepare for unexpected expenses, and the benefits of an emergency fund when they’re on their own.
Teens are prime targets of advertisers and social media influencers. Talk to your child about the importance of healthy spending habits and how to avoid unnecessary debt. What they’re seeing on social media isn’t reality, but the debt that they’ll accumulate is real. If you’re considering giving your child a credit card, start with a prepaid card or one with a very low credit limit. Help them monitor their purchases and ensure they can keep up with their payments. Now is also a good time for an introductory lesson on credit scores, including the impact of credit usage on your credit score.
Teenagers also need to know how to review their own finances honestly. Teach them what to look for so they can identify and avoid potential debt problems before they become unmanageable. Let them know they can be honest with you about money problems, and that there are qualified professionals who can explain and provide debt solutions for people with too much debt.
There are nearly endless opportunities for teaching your kids about money at every age. Whatever topics you tackle, your kids will benefit from developing positive money and debt management skills. The more they learn now, the better prepared they’ll be for a healthy financial future.
If you’re experiencing any of these warning signs of debt problems, schedule a free, no-obligation consultation with a Licensed Insolvency Trustee today.
May 18, 2021
Whoever said, when it comes to kids, “the days are long, but the years are short,” got it right. Time flies, especially when you’re trying to prepare them for important life milestones and personal independence. This is just as true when it comes to money management.
