Disclaimer: The below is solely intended for informational purposes and in no way constitutes legal advice or specific recommendations.
One of the top skills people wish they’d learned in school is basic money management, but personal finance lessons are usually left up to parents. You can give your kid a head-start in life if you teach them the importance of earning and saving, the rules of credit and interest, and how to manage it all when they’re living on their own.
Big Life Lessons For Little Ones
Your tiny tot is learning how to count, so you can start incorporating lessons about how to earn, save, and spend money. Reward your child for completing chores with cash, and let them store their money in a piggy bank.
If there’s a toy they want to buy with that hard-earned cash, you can teach them the value of money and how to save up for exactly what they want. Chances are, your youngster will show more responsibility with money they’ve earned and spent themselves – plus, they’ll appreciate it more than something that’s simply given to them.
Other than showing your child how to save money over time, you can also teach them the importance of a budget. For example, you could let them help you clip and use coupons at stores to show them how indirect savings can add up.
Financial Knowledge For Your Teen’s Future
Your preteen or teen has moved beyond the piggy-bank method of saving money, and it’s time to open their own bank account. Your child should be aware of how much money they’re earning and how much they have stored away. This is a good time to introduce lessons on raises, taxes, and credit.
A raise could be considered when a child shows that they complete chores well and without being reminded. An annual increase in pay for a job well done can help prepare them for what they can expect once they’re out in the workforce.
If your teen is able to juggle school and a part-time job, this is a great time for them to learn what happens to their paycheck: That $10-per-hour wage doesn’t mean they’re getting the full amount, which can be a bit of a shock. Work with your teenager to fill out the appropriate forms during tax time so they understand exactly where those federal deductions are going.
The Basics Of College Credit (And Debt)
Credit card companies count on college students being financially clueless so they can lure them in with low “introductory” rates. Arm your child as they head off to school by introducing them to credit cards and investments.
Guiding them through the benefits of credit – and the danger of bad financial habits such as only paying the minimum — can help immensely when they open their first credit card. If they’re taking out student loans, make sure that they understand the paperwork they’re signing, as well as the repayment expectations when they graduate.
Even if your child ends up moving back home after college for a little while, teaching them early lessons in money management can give them an advantage once they’re finally ready to leave the nest.