Your child’s future well being depends on them being financially literate. And yet, the schools we rely upon to educate our children while we work, fail to address how to properly manage money. It’s up to parents to ensure that their children are financially adept.
Being skilled with finances from a young age allows children to invest over a broad time horizon and build wealth. Unfortunately, many young people are more likely to spend every cent of their paycheck rather than save and invest. Freedom Debt Relief put together this guide to help you educate your children on finance.
Credit and Plastic
Credit and debit cards have made money a more difficult concept to understand for young people. Rather than having to exchange dollars and cents for goods and services, kids swipe a card and the transaction is complete.
Freedom Debt Relief knows this can make it more difficult for young people to grasp the actual cost of goods and services. Talk to your children about how credit and debit work, and make sure they don’t buy everything by swiping a card.
To help your children gain financial literacy, let them in on the family finances. Many parents feel the subject is taboo, but your child and family will be better off. The successful entrepreneur and founder of the highly successful debt management company Freedom Debt Relief, Andrew Housser constantly notes the importance of education, understanding, and planning. As his advice has borne out, these are good practices to start in children from a young age.
Freedom Debt Relief recommends avoiding words with negative connotation such as budget and instead talk about a family spending plan.
Teach them the value of saving by deciding on something the whole family wants to buy like a laptop. Keep a jar of saved money and add to it anytime someone in the family is able to save money. Once you have enough, price shop with your children to show them how to find a deal.
Give an Allowance
An allowance can be an extremely valuable tool in your child’s financial education. But don’t tie an allowance to chores. This leads children to believe they should be compensated for helping the family out. Use the allowance to teach your kids about money.
Divide the money you give your children into four different sections. Investment, saving, charity, and spending. Anything in the spending category can be spent as the child sees fit. The charity section teaches them the value of giving to others. Saving will show them the importance of having an emergency fund. And finally, as soon as your children have enough in the investment section, you can open an investment account with them and teach them the value of investing
Freedom Debt Relief recommends that as your child hits their teens, consider a prepaid credit card as part of their allowance. Having your child manage electronic money prepares them for when they have their own debit or credit card.
Seek Professional Help
If you aren’t too sure about finances, consider looking for a certified financial planner who is willing to help educate you and your family. Freedom Debt Relief has seen many people thrive after seeking guidance. By looking to those who are financially adept, you can avoid unnecessary mistakes that cost you your hard earned money.