As parents, we want to make sure that our kids grow up able to better handle the world and all of the challenges it can offer. However, how many of us started with a good understanding of money? Plenty of teens and young adults leave home only to find themselves vastly unprepared for the realities of living with bills, managing debts, and reaching financial goals. Here, we’re going to look at how you can give your kid a better start at managing their money.
Give Them Clear Savings Goals
When managing family finances, you have plenty of experience putting savings aside towards long-term costs and goals. You should teach your child the same, with small, specific, and tangible goals, whether it’s saving for a phone, a concert, a trip with their friends, or even part of a future car. Plan out the goal, showing them how much of their allowance they have to put aside and for how long until they reach it. Revisiting the savings goal with them periodically can help incentivize them to put even more away to reach their goal quicker, which in turn teaches them the power of delayed gratification.
Help Them Open Their First Account
Opening up your first savings or checking account is a big milestone on a kid’s financial journey. Talk them through the process and help them find a good credit union that can keep fees low and savings interest high. Discuss the importance of monitoring their transactions, knowing the fees that come with any banking service, and how to keep their accounts secure. Having their own account can give them a sense of ownership and responsibility over their money, which will encourage better habits down the line.
Teach The Importance Of A Paycheck
Encouraging your kid to find a part-time job is one of the most powerful tools for helping them understand the role of money and its connection to time and effort. From there, you should teach them to budget their paycheck, such as with the help of an app that can allow them to see where they spend their money, how they can prioritize it, and where they can adjust some of their bad money habits.
Help Them Understand Credit
A lot of kids go off to college or their own home without really knowing how credit works. They can look at borrowed money as “free money”, which can end up serving them a nasty surprise down the line when they’re expected to pay it back. Help them understand that not only are they going to have to pay off whatever they borrow, but that the interest rates will continue to affect them throughout the life of the loan. You can do this, for instance, by loaning them some money yourself and charging interest. Secretly saving that interest aside for a bonus when they pay back their debt can add a bit of a positive feeling to the lesson, too.
Finances are something that have to be learned, just like any other life skill. You can’t expect your kids to intuit their way to good financial health, so follow the tips above to help them along the way.
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