Teaching kids about money is one of the major concerns of parents today. How can it be done in such a way that makes sense to their young minds?
It’s important to introduce them to money as soon as possible and make sure to teach them the differences between needs and wants—and why needs are more important. Similarly, you should always stressed saving and setting goals over spending. In fact, when it comes time to assign an allowance, make sure that they set aside some money for saving; it may even be wise to open them their own savings account, assuming one can be found that does not require a large opening balance. Teach them to save up for the toys—and later iPods and even cars—they desire.
Make sure to explain how credit cards work—and about borrowing and interest. Specifically, ensure that you make out borrowing to seem like a nightmare, which it usually is, rather than the money bonanza that causes many to “blow-up” financially. Don’t allow a child or teenager control of a credit card, even for “emergencies”; instead, perhaps a debit card would be more useful. It’s been statistically shown that teenagers usually use credit cards for anything and everything, rather than merely emergencies, no matter how quick to follow the rules they usually are.
And speaking of interest, help your child learn the math—oh no, the horror!—of interest rates. Show them how, when coupled with interest over months or years, that relatively small upfront cost might balloon several-fold.
Include real-life examples in their education, such as grocery shopping, saving wisely on clothing and school supplies, and even calculating the tip for a restaurant bill.
Of course, the individual education of the child should be tailored to fit that child’s needs, but ultimately, the most important lesson your children should walk away with is that one shouldn’t fear money, budgeting, and the complexities of the financial world. With a little common sense and money smarts, they’ll be just fine.