With the first day of school well behind us, and students settling into new routines, now is a great time to take up some learning outside the classroom. Many school curricula don't include financial literacy, so demonstrating the value of money in real world situations has extra importance. Teach your kids about some easy financial basics they'll thank you for later.
Managing finances and understanding how money really works needs to start at a young age. This way, bad habits don't develop and your children are ready to make smart decisions with their money.
To make this all easier, I've developed three fun ways to teach your kids about money:
1) Start young and make it fun. It's important to introduce your kids to the concept of money early on, so that they understand and respect it as they grow up. However, being kids, they're going to want it to be fun and there are plenty of ways to teach them something valuable and have a good time. Try breaking out board games that focus on money and life skills, and let your kids handle the money in a safe and controlled setting. Once you've done this, try giving them $10-$20 when going into a store and ask them to pick something for themselves. Once they realize there is a cost associated with what they want, they may think more carefully about what they purchase.
2) Set them up for success. As your kids get older they'll need to learn how to save. Consider introducing an allowance or monetary rewards associated with a household chores system. This will teach them what it takes to earn money, and it will also show them what it takes to save money. Also consider getting them a no fee bank account. It's something adults deal with regularly, so it's important to let kids see how saving works by allowing them to check their accounts, make deposits and withdrawals -- and by choosing a no fee option, you're showing them how to save on unnecessary costs. Lastly, never be wary of saying "we can't afford that" -- it's tough for many parents but it's crucial for kids to understand that sometimes you have to say "no" and save up before making impulsive purchases.
3) Prep them for the real world. Parents with teens need to take initiative to prep them to deal with real world expenses. When they leave the nest, they'll be faced with rent, bills and credit cards. These are factors which affect credit scores and should be taken seriously. Try letting your kids guess how much they think the family spends on things like groceries, home items, and gas. Once you've agreed on the figure, let them use this budget to cover the household budget for a month. They will learn quickly how fast money can go and how important it is to budget and conserve. Introduce your kids to credit cards and explain how they work. Once they're old enough for their own card, credit cards can be a great way to build a credit score as long as they are used wisely as a financial tool. The key here is to look for a no annual fee card that can be used to earn value on key items that are always a necessary part of monthly spending, like groceries and household items.
Having these discussions with your children is really important. Kids need to learn about money and the sooner the better, because let's face it: it's an expensive world that we're preparing them for. It is so important that we ensure the next generation has the tools to be financially independent and successful -- that's how we all win.
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