How To Teach Children To Manage Money

One of the most important things to teach children before they move out on their own is how to manage money. The surest way to fail financially, no matter how successful a person is in their career, is to manage money poorly. This is definitely not a lesson for someone to learn on their own.

From the time children are young, they should be given the opportunity to learn about how to manage their finances. They need to understand that credit cards are not a free flow of money. They need to understand that checks are useless without funds in the bank to over them. They need to learn how to budget and how to save some money for long term goals and emergencies.

A lot of teenagers and young adults feel that living off of their credit card is okay. They apply for a credit card, get approved, and then go and max it out. This is horrible for a persons credit and they will be paying this debt back for years upon years. Young people need to learn to use credit cards responsibly, as a convenience when the money to pay it is already in the bank. Some people use credit cards in an emergency, and while not ideal, as long as there is a plan for how to pay it off quickly, this can work.

The ability to balance a checkbook is an essential money management skill. They need to know that they should always be aware of how much they have available in the bank so that they do not bounce checks or run out of funds to pay their bills. A lot of young adults are not good at setting up a budget and then they come running to mom and dad to borrow from when they do not have enough left to pay the rent. Children and young adults should be taught that bills always come first before they go spending on everything else.

Saving up for a rainy day seems to be a lost art these days, even among adults, but it’s important for young people to learn the importance of saving. Any extra funds that are left over after bills are paid and groceries and any other essential is paid for, should go into children’s savings accounts. Everyone should have enough savings to live for at least six months in case they lose their job or have some other unforseen problem. Savings also come in handy when there are surprise expenses like car repairs. Too many young adults run into problems and have no safety net. They call on their parents to bail them out, but at a cost to their independence. Besides, mom and dad might have not have the money available to help out.

Parents should help kids learn to save early. Start with a piggy bank and then move up to a savings account when they’re ready. Give them the opportunity to earn money by doing chores. Let them pick out something that they really want to buy and help them establish a goal for saving towards that item. This will help teach them the process of saving. Once they have enough saved up, help them go out and buy what they’ve saved for. The positive experience will reinforce the idea that it’s worth forgoing immediate gratification to get something they really want later. Once a kid can add and subtract numbers with decimals, start having them use a checkbook to track their money. This will show them the process of budgeting and keeping track of their earnings.

Many banks offer pre-paid debit cards for young people. This will help introduce them to the world of electronic cash. They’ll learn that a plastic card is only worth the cash behind it. Remind them to keep track of their funds and to be careful with their savings.

It is never to early for teaching kids to manage their money. If they learn how to manage $5 when they’re young, they’ll be better prepared to manage their salaries when they grow up. It will benefit them in so many ways and will help them to succeed in their life in so many ways.