A person’s credit score translates to securing an apartment, purchasing a car and getting other types of loans. It can also mean whether or not a person gets a job because their score says a lot more about a person than how financially savvy they are. Consider these options when teaching children about money, which will teach them important lessons they will carry into their adulthood.
Every child should be taught how to save money. Numerous people end up in debt because they lack impulse control. Everyone wants things now, which creates big issues resulting in debt and low credit scores when the debt can’t be paid off. There are a few ideas on how to save money. Some suggest using three jars labeled “saving”, “spending”, and “donating”. While it’s good to spend and donate, children need to learn that they have to have enough money to purchase something; otherwise, they can and will end up in credit card debt when they’re older.
Print out a picture of an item they want, and place this on a jar. Help them to collect money. This can be done through birthday money, allowance or selling old toys. Once they have enough money, take them to the store and let them directly purchase the item.
After children get used to saving money for an item, teach them how to budget. This system can be devised in many different ways. For instance, you can put them in charge of purchasing their own personal products, toys, clothing and school supplies. Allot a certain amount for each, but leave it to their discretion how items from these categories will be spent. At the end of each month, discuss how they spent this money so that they can learn which purchases were wise and which were not.
While it’s not entirely possible or reasonable to get a child a credit card, they can still learn about debt. Decide on a certain amount that can be done without and an amount for allowance. Decide on a date towards the end of the month or at another time the allowance will be given. Give the child the option of purchasing something before they are to receive their allowance. When the date of allowance comes, subtract the amount they spent from the allowance to get a balance, and give them the option of paying off their debt with their allowance or through some other means. Teach them that if it’s not paid off on the date the allowance arrives that they will incur debt with interest. This will teach them not to spend an amount greater than their allowance so that it can be paid off each month.
Real-Life Financial Planning
Parents may not want to disclose how much they make or include children in every financial decision, they can teach children how to think ahead and work out a budget. At the supermarket, give children a certain dollar amount. Specify what needs to be bought with that money, and allow them to make decisions on what to get according to the rules and keep within that dollar amount. They may discover that getting a generic brand of toothpaste will save money, and, in turn, they can spend more on another item that has better quality.
Children are capable of learning about money, but very few parents and other adults give them the option to do so. You may be pleasantly surprised to find out how financially savvy your little one is.