Unfortunately, most schools do not teach children about the importance of money and how to budget properly (What’s up with that!?). Because of this many kids learn how to budget from their parents. So it’s time to flex that financial muscle of yours and teach Jr how awesome you are when it comes to finances. Time now to teach them a thing or two about the importance of money.
You remember that first job you had and the first paycheck you got? It felt great to see that your hard work paid off at the end of the week in the form of a check. Well you can help your child feel that way too by giving them a small allowance depending on how much work they get done around the house (Or for excellent grades in school). Teaching your child that hard work pays off in the end is such an important lesson to learn at an early age.
Value of Money
As you obviously know that piece of paper with an old man on the front has a value (Depending on which old man is on it). Teaching your child the value of money can help them make better decisions with how they spend it. For example, if your child does the dishes, takes out the garbage and cleans up his room, you will give them $2.00. Now when you go to the store and they see that squirt gun he really wants and little Billy doesn’t have enough money for it, he will realize he has to learn to save his hard earned money in order to purchase that more expensive item (Or like that remote controlled helicopter, man I would love one of those… flying around trees, making the neighbor’s dog go nuts… anyway moving on). He may want you to help out (And by may I mean will). Stand your ground and avoid helping them purchase the toy. You may feel bad but in the end you are helping to teach them a valuable lesson.
One more thought on this… It’s also important not to just tie money to household chores. Children should help around the house regardless of compensation. You don’t want your child thinking “I’ve got enough money for a Playstation, I don’t have to work anymore.” You want to teach them that helping around the house is about more than money. It’s about helping the family. Allowance can be earned in several ways, including chores, but the chores should be done without the promise of money.
Needs Vs. Wants
Talking about remote controlled helicopters brings me to my next point, the difference between needs and wants. To a kid, that toy is something they believe they need when in fact you know that it is something they want. As a refresher, a need is either food, shelter, and clothing. Almost everything else falls into the want category (Of course there are exceptions). Teaching children the difference between needs and wants at a young age can help them to think twice before making a purchase.
The credit card, the magical card that grants you the ability to purchase anything you want according to many kids. As you know, when you use that “magical” card you get a “magical” bill at the end of the month. Understanding cards and how they work can be confusing. This is why my parents waited till I was in high school to teach me about credit cards. I was given my first credit card when I went off to college and only used it for emergency purposes (Such as gas, food if I was out etc.). They told me the penalties that can be incurred if I make a late payment or if I only pay down the minimum. Having learned these tips from my parents, I was able to go through college without missing a payment while paying off my credit card debt in full.
Fact: According to Charles Schwab and Co. Inc. Only 29% of parents had taught their children about how credit card fees and interest work
I was very fortunate to have parents that took the time to educate me on the topic of budgeting and saving. Because they taught me at a young age, I am financially responsible today. So what important financial tips have you learned from your parents?