The schools in your area will teach your children how to read, write, and do the math. But some important, practical life skills aren’t part of the curriculum, such as handling their own finances when they grow up.
One of the most important things to teach your children is how to develop great money habits. Of course, it’s not easy to do in a consumer-focused culture, but your kids are eager to learn from both your words and your example.
How can you help your children develop strong money habits? Here are some tips.
You have to divide the money between your various obligations, desires, and savings every time you get paid. Encourage your children to do the same from an early age.
You might use an age-appropriate allowance to do this or allow your kids to earn money from doing chores around the house. They start to see the tradeoffs that we all face as they decide how much to spend and how much to save for future goals or big-ticket items.
By encouraging them and celebrating when they hit a savings goal, you can show them the value of delayed gratification.
Always Compare Prices
One thing that many children don’t understand is that similar items can have very different prices. So it pays to shop around and understand who has higher prices and why. When you shop around, look for companies and products that have great customer ratings.
For example, Freeway Insurance reviews consistently have high ratings that show this is a great company to use when you need to compare prices to get the best auto insurance rates. As you shop around regularly to ensure you keep your insurance rates low, talk to your kids about what you’re doing and why it’s important.
You can also point out how, say, peanut butter has a variety of brands at different prices. Help them understand when there’s a quality difference and when there’s not, so they can make wise choices in their adult life.
Talk about Credit
Credit and debt are a reality for most young adults as soon as they turn 18 and look for ways to attend college or buy a car. By talking about credit and debt earlier in their lives, you can help set realistic expectations and encourage your children to make wise choices with large purchases.
It can be challenging for a young person to understand being tethered to a debt payment for decades, so find ways to describe the process that fits their frame of reference.
Work on a Budget
As your children get older, they’ll start having some regular expenses and even a job. This is the perfect time to help them create a budget. You might even share your household budget or parts of it, so they can understand the various obligations that come with adulthood.
Balancing income against expenses is an ongoing process for everyone, so the younger your kids are when they learn how to budget, the better. Budgeting and tracking expenses as a teen is a great way to practice for college and beyond.
Kids Need Great Money Habits
Kids of every age need a strong understanding of how money works and what the demands of budgeting and saving look like. By setting a strong example in your own life, along with using the tips we shared today, you can set your children up for success.