Make Your Kids Money-Wise

When you start thinking about the facts of life that your children need to know, remember that money is one of those facts. It’s the rare human being who doesn’t need to know, early or late, how to manage personal finances. And in this case, early is always better.

A foundation in finance can protect your children as they venture into the adult world. For instance, when they come up against the cold hard facts of things such as student loans. The Consumer Financial Protection Bureau estimated in 2013, for instance, that seven in ten college seniors graduating in2012 had an average debt load of $29,400 going into their productive years. More K-12k programs in financing are being offered, but still too many young adults launch themselves into the working world with no idea of what to do with the money they hope to make. Many of them will end up in the financial morass that will affect their well-being throughout their lives.

What to teach kids about money? First of all, you can’t teach what you don’t know. If you don’t feel prepared, learn what you can about budgeting, debt, saving, investing, <a href=”http://www.coolchecks.net/”>checking accounts</a>, etc. Then involve them in discussions and practice of these elements.

Remember that they will pay more attention to your example than anything that you may tell them about money. A bad example will offset any advice you offer. Make them part of family financial matters and don’t let them grow up thinking that their whims and desires cancel out reasonable spending policies. Honest dialogue and consistent example will take care of the first lessons in the fundamentals of money management.

Make your teaching concrete, with an underpinning of the basic principles, as well as the techniques. Encourage them to set money goals, to prioritize wants and to share. The principles, including the truth that you can’t reasonably purchase things you can’t afford without consequences, hopefully will stay with them for life.

Too many modern children grow up feeling entitled and blaming others when things go awry. A foundation of wise money management will help foster honesty and the sense of responsibility that are the basis of sound finances. Ideally applied, it’s the foundation on which a child can learn to handle debt and save something to meet future needs.

Having a little spending money is essential to learning how to manage resources. Ideally, it will be tied to responsibilities. That’s how it works in the adult world. Having a little to spend gives the child the opportunity for practical application of what you’ve been telling them. Resist the urge to micromanage. You won’t be on the spot when they are making those adult decisions. If they make mistakes, point out the inevitable consequences. (They can only spend their money once and when it is gone, there isn’t any more until the allotted time. And make that stick.)

People who have succeeded financially in this world point out that an early start is one of the best predictors of who will make it. Warren Buffett, for instance, started his first business at age 6. If it’s feasible, make opportunities for your children to dabble in finance. A lemonade stand or garage sale will facilitate that.

Talk to your kids about consumerism, impulse buying and the effect that advertising may have on one’s spending. Suggest a “cool-off” period before any considerable purchase to help distinguish between “wants” and “needs.” Being required to wait a month for something perceived to be a “need” may help recast it as a “wants.”

Money is a tool to help achieve the things you desire in life. Ignoring the laws of financial health can have serious consequences. That’s the message your children need.