Teaching Your Children About Money – Avoid These 5 Mistakes!
November 5, 2018|Posted in: Happy, Healthy, Smart Kids!
Teaching Your Children About Money?
Your kids are never too young to start learning about money. Younger kids have very moldable minds. If you start teaching them about money from the time they’re toddlers, your children are more likely to grow up to become financially wise adults.
However, in your quest to teach your children financial literacy, you may fall into some traps. Some tactics you take might be problematic in the long run, especially if you’re failing to consider some stuff they’ll wish they knew when they run into a roadblock. Are you making mistakes?
- Forgetting Taxes and Debt
Kids often don’t understand that as adults, they won’t be able to keep all the money that they make. They’ll need to pay taxes and debts. Debts from things like mortgage loans or auto loans are important, and debts on credit cards used for frivolous purchases should be avoided.
Make sure to explain to your kids that they’ll have tax obligations that ultimately determine how much money they actually have, and that necessary debt payments also whittle that figure down. In the process, they’ll understand the importance of avoiding unnecessary debt and being careful about overspending.
- Giving Them Too Much
Every great parent wants to give their kids the world. It’s sometimes hard to see that doing so isn’t always wise. If you buy your kids everything they want, even if it’s just a piece of candy at the grocery store checkout, you’re missing a valuable opportunity to teach them about budgeting. If your kids have an allowance, don’t purchase them frivolous things outside of holidays where doing so would be normal. Let them save up for the things they want and make their own small scale financial decisions.
Importantly, if your children spend their money completely, and then suddenly find something else they would want to buy, don’t rush to the shop and buy it with your own money. Unless the purchase is absolutely necessary (like school supplies), don’t buy it. If you do, you risk setting a dangerous precedent – that you will always cover your children expenses when they are broke.
- Separating Work Ethic from Income
Money comes from work. It’s not enough to know how to be good with money if your children don’t understand how much goes into making that money. Start building early associations between getting money and working for that money. Most parents do this with a chore-based allowance system. Take that system one step further. Did they forget to do something or did they do a bad job just to satisfy your minimum requirements? Dock their allowance. Are they willing to take on more responsibility and do a better job? Give them a raise in their allowance. Creating these correlations can help your kids learn to be trustworthy, reliable, and dependable. They’ll see how it pays off in the end.
- Improperly Emphasizing Education
Most parents who want to set their kids up for fruitful financial futures will talk a lot about college. College is necessary for many high paying careers, but it’s not necessarily the only way. If your child has aspirations that involve a trade certificate or specialty training of some kind, that’s just as important as college. Rather than throwing all the emphasis at a college education, throw the emphasis at proper knowledge, credentials, and training. It leaves more doors open.
- Explaining Savings
You can open a savings account for your child at any time. Encourage your child to put just a little bit of money into that savings account. If your child starts saving money at 5 years old by contributing one dollar a week, they’ll have saved $676 before interest by the time they’ve graduated high school. Saving five dollars a week will net $3,380 in that same amount of time before interest. That little bit of inconvenience and patience can pay off tremendously at the end. Make sure your children know that having money doesn’t necessarily mean they need to spend it.
Sometimes, sitting by and watching your kids make a few money mistakes and learn the consequences is one of the best things you can do as a parent. You know they’re taken care of and they’re secure – this is the best time for them to make budgetary errors and learn. Just make sure you’re teaching them the right way and everything will naturally fall into place.
About the author:
Alana Downer is a financial blogger with years of expertise, currently supporting Learn to Trade, an online resource for the money-conscious. Alana enjoys sharing her experience, and often writes about things like passive income or reaching financial independence, hoping to help people become financially free and make their dreams come true.
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