When your kids are still young, it’s easy to believe that teaching them about money isn’t necessary yet. Indeed, many parents wait until their children are teenagers with their own money to begin instilling financial wisdom, and still others never teach them at all. Unfortunately, this can have disastrous consequences. Some financial experts now believe that most kids have destroyed their credit rating by the time they’re 16 years old. Bad credit and poor money management skills can impact your child’s ability to go to college, get an auto loan, buy a home and in some cases, even get a job. For these reasons, it’s essential to start teaching your children early about financial pitfalls and how to avoid them.
Financial Pitfalls To Warn Your Kids About
You Can’t Get Something for Nothing
Some people scoff at the idea of giving their kids an allowance, but it’s actually one of the best things you can do for them. However, there is a big caveat. You should expect them to do work for their allowance, such as doing chores or helping out in the family business. An allowance is only a bad idea if you’re giving it to them for doing nothing.
Credit Isn’t a Solution
Another discussion you should have with your kids while they’re young is the topic of credit. These days, it’s all too common for people to treat credit cards like free money, which inevitably results in financial strain later. Teach your child that it’s unwise to spend money they don’t yet have just to gain satisfaction now. Furthermore, if they ever do get a credit card, make sure they know that it’s far from free money. They still have to pay it back later on, plus interest and possibly fees. If they get in too far over their heads, they could even encounter legal problems. Although Brampton bankruptcy trustees, like those at Paddon & Yorke Inc, can help with this, it’s hardly an ideal situation. Here is one way to get the message across early: If your child asks for extra money above and beyond their normal allowance, give it to them, but set up a plan to have them pay you back with interest. Children learn best by doing, and money is no exception.
Don’t Ignore Tomorrow
When your child receives money, whether from an allowance or as a gift, talk with them about the importance of saving part of it. Emphasize that nobody knows what will happen tomorrow, and that having money in the bank can help them avoid a lot of stress. If they spend all of their money now, they won’t have any for future wants or needs. A good way to start your child on the path to responsible savings is to start a savings account for them under your name. Let them look at the statement each month so they can actively see their safety net growing.
Going, Going, Gone
Children can be impulsive, and you should expect them to make financial mistakes with their money occasionally. This is part of the learning process. Tell them that once they spend that money, it’s gone. They will quickly realize that anything else they want will have to wait until their next allowance, and may begin adjusting their spending habits to correct it.
Because money takes such great importance in today’s world, it’s essential to begin learning financial lessons early. You can do your children a favor that will serve them for life by instilling them with the necessary skills to manage money properly.
This is a guest post written by Kandace Heller. Kandace is a freelance writer. She studied Communications at the University of Florida. Her favorite hobbies are reading, writing and spending time at the beach. She loves researching new information and sharing it with others.
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