Debt; it is the farthest thing from the mind of a child. But, shouldn’t it really be something to talk about early on? After all, kids are in a unique position to learn proper money management skills without the consequences found in the adult financial world.
Practice, Practice, Practice
As parents, we have been given the responsibility of teaching our kids about the world, and that includes finances. Most of us aren’t really qualified to teach kids about money management, especially when we find ourselves in over our heads with debt. However, it doesn’t take a brush with bankruptcy to see how important it is to teach these skills to kids so they can avoid following in our financial footsteps.
Make it important. Kids rarely think about money or how their parents earn it and spend it. It is vital that kids understand how money is earned, the effort involved in budgeting and why saving is important. Money should be a positive, yet consistent, topic in every household. Get your child’s input about money and let them be part of the process.
Make it purposeful. Kids need direction and finances are one aspect to life that often is best served with a lot of guidelines. Sit down with your kids and outline a financial plan for the family. Set rules for spending, where each family member gets a spending allowance for the week or month. Set up a savings requirement, and have each family member keep a jar or similar item that is used to specifically save a portion of their money each month. Post the financial plan where everyone can see and do weekly or monthly check-ins to see how each member is doing.
Make it an experience. Even kids need to understand the consequences of poor money management. Not saving enough and overspending are two very real problems among adults, so why wait for a child to grow up to experience the effects? Older children and teenagers should have access to a credit/debit card linked to an account you manage. Overdrawing the account can teach a valuable lesson in managing finances. From there, you can encourage budgeting and purchase tracking skills that they will carry throughout life.