Teach Your Children These 5 Things about Finances

Starting your children off with a right view of finances is so important these days – especially when debt seems to be a common way of life for so many. Who knows if the young parents of today were ever taught such a vital lesson in life as being able to properly manage their finances. Perhaps their lives would have been so much different.

It is however possible to change the way our own children look at money. Here are five important lessons you should teach your own children about money.

1. Money Does Not Grow on Trees

Children do not understand – at least when they are young – the concept of money. They think there is an unlimited supply of money. They think that you only have to go to the bank to get money in unlimited supplies. You often hear them say “Why don’t you put it on a credit card?” when they see something they like. They don’t understand that you have to pay it later.

So it is very important to teach them the whole process. Teach them that you have a limited amount of money and that it becomes less if you have to pay something. (Use some coins to explain this process.)

2. Importance of Saving

Teach your children the importance of saving. Teach them that they have to save money before they can buy something. Also teach them that they have to save 10-15% for unexpected things. For instance, if they receive a regular allowance, let them put 25% in the bank. (10% for something they want and 15% for unexpected things. The rest they can use.)

3. Saying “NO” To Some Unnecessary Things

One of the most valuable lessons a child can learn is to willingly choose to say “NO” to some purchases – even if they really want it. Do not give them money every time they want it. (Explain tip 1 again.) A good incentive is to tell them that they can buy an even better or bigger thing if they save a little longer.

Also teach them to compare prices and that sometimes a better deal can be made in a different store. (So that they have a little money left over.) Teach them the vast difference in the quality of similar products.

4. Set a Budget

If your child receives a regular amount of money, you need to show them how to plan for a wise use of that money. Teach them that they have to put money aside. They should put money aside for three different things: money for spending, money for special purchases (that require them to save for it) and a long-term savings.

5. Teach Them about Credit Cards

Credit cards and checking accounts are easy, because you don’t have to carry cash. But your children only see you handing over the plastic, or another piece of paper. (So they think there is an unlimited supply of money you can spend, they don’t see that you have to pay it later (with interest) Teach them that you can only buy X much and that you have to pay something extra because you use credit cards.

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