Helping your child get their financial footing is a lot like teaching them to ride a bike. When you first start out you’ll need to give them lots of help and guidance.
The farther they go (the older they get), the more confidence they’ll have and the better they’ll be able to keep their financial balance. The ultimate goal, of course, is to have them become financially independent.
There are lots of ways to get them headed in the right direction. Here are some to consider:
- Help them understand needs versus wants. The needs include essential things such as food, clothing, and shelter. On the flip side are wants – a new cell phone, a puppy, a new car. Explain that needs should come before wants when dealing with finances.
- Set the example when it comes to living within your means. Don’t overspend and don’t buy things for the sake of having them. Kids pick up quickly on your habits and will usually mimic what you do.
- Teach them the importance of creating a budget and sticking to it. This includes explaining income and expenses and striking a balance with the intent of incurring little or no debt. Show that a budget is one of the most important financial tools at their disposal, and that it should be relied on and updated on a weekly or monthly basis.
- As your child gets older and starts incurring regular expenses – cell phone usage, car insurance, gas – have him contribute toward paying these expenses. It makes them aware of what things cost and gives them a better appreciation of what you’re paying for them. It’s also taking another step toward their financial independence.
- Don’t’ give your kids everything they want. Whether they’re a toddler or a teenager, you should explain when you think something they’re asking for isn’t within your budget or you don’t think is necessary.
- Encourage children to get a job in their teen years. From part-time work during the school year to a full-time job during the summer, having them earn an income is an essential part of their road to independence.
- Teach them the proper way to use a credit card and gain and maintain good credit. This means paying your credit card bill in full every month. Explain to them that if they only pay the minimum due, they will incur interest charges that will continue to pile up until the balance is paid off. In other words, they’ll be living beyond their means and creating debt that could become unmanageable.
On the other hand, if they establish a good credit record, it will pay off when they go to get a loan for such things as a car or college tuition because lenders will be more inclined to provide funds based on a solid credit history.
- Teach your children the importance of paying their bills on time – another factor that comes into play as far as maintaining a good credit background.
- Just as important is to show them how you put aside funds in a savings account on a regular basis. Then take it one step further and teach them to start saving at an early age. Many banks and other financial institutions have special accounts designed specifically for youngsters, as well as for kids in their teenage and college age years.