Learning
how to save money is something we all should have learned as children — but
most of us didn't have the chance or were never instructed on how to be
responsible with our income. Instead of perpetuating the cycle of young adults
who don't know how to live within their means, how can you teach your kids how
to save money — preferably before they're out on their own?
1. Pick Out a Piggy Bank
For
little ones that might be too young to open a custodial bank account, head to
the store and let them pick out a piggy bank. These cute little creatures come
in all shapes in sizes — I've got one that looks like Toothless from "How
to Train Your Dragon" — so they're sure to find something they like.
While
you're searching for the perfect bank, talk to your children about the
importance of saving money. You don't have to go into specific details,
especially if your kids are on the young side, but use a toy or something that
catches their eye as an example. Tell them that they'd be able to buy that toy
if they saved their money, and point out how they can use a piggy bank to do
that.
2. Talk About Money
It's
tempting to shield our children from the responsibilities of being an adult,
especially where money is concerned. We pay our bills behind closed doors and
wait until they've fallen asleep to discuss any problems or worries about our
incomes.
Don't.
Your
children will have the same responsibilities once they reach adulthood. The
earlier they're exposed to this fact, the better prepared they'll be to deal
with it. Get them involved
in paying bills as soon as they're interested. If you're discussing a large purchase,
ask their opinion. For older children, you can show them the budget or your
bank statements and ask them if they think you can afford to buy a new car or
replace the aging refrigerator.
Making
them think about it now means it will be on their minds as they head out into
the world, get jobs, earn money, and rent or purchase their first homes.
3. Make Them Earn It
How
many of us had an allowance when growing up, that we didn't have to do anything
to earn?
Don't
feel sorry about raising your hand. Ours is up there with yours. For many
parents, just handing over spending money every week or month is more
comfortable than the inevitable fight that occurs when you try to get them to
do chores or earn their allowance money.
If
you're trying to prepare your little ones to be functional adults, an allowance
they don't have to earn is unrealistic. Instead, set up a chore chart with
age-appropriate tasks for each child and assign a dollar value to each one. Not
only does this serve as an incentive to get them to make their bed or brush their
teeth every morning, but it also introduces them to the concept of earning an
income.
4. Practice What What You Preach
We
try our best to tell our children what to do, but that doesn't usually work.
Kids want to be just like mom and dad, so instead of doing what we say, they
mimic us. If you're telling them to save money while spending all yours,
they're not going to learn anything.
One
of the most critical things you can do to teach your kids about money is to practice
what you preach. As you're working through these steps with your children, take the
time to apply them to yourself as well. You may end up learning something new
while you're teaching them how to manage their money.
5. Talk About Debt
Contrary
to popular adolescent belief, credit cards are not free money. We need to do
our very best to disabuse them of this notion before they're old enough start
sending out credit card applications. Consider this just another one of the
"coming of age" talks. Around the same time you discuss sex, provide
them with the debt
talk as well.
Teach
them about how credit works, what interest rates are and how they raise the
cost of your balance if you don't pay it off in full every month. If you're not
100 percent sure how these things work yourself, head to the bank. Bankers are
usually more than happy to pass on their knowledge to help teenagers and young
adults learn how to navigate the sometimes dangerous world of credit cards.
6. Don't Forget Taxes
Do
you know how to do your taxes? If you answered yes, how old were you when you
learned? Most of us didn't figure it out until our mid-20s at the earliest, and
some people don't even know how to do their taxes at all. Instead of learning
to navigate the ever-changing tax code, they prefer to leave it to the professionals.
The
first time your child will have to file their taxes will probably be the
easiest — they'll be submitting as single with no dependents, and only need one
form. Teach them how to do this, instead of spending the sometimes hundreds of
dollars to have it done by a tax prep service. Understanding how taxes work
will help them manage their money before they start having federal and state
income taxes deducted from their paychecks.
Don't Stop Talking
Our
world revolves around those little green pieces of paper we call money, and
your children will need to know how to manage them before they head out into
the world. Don't stop talking to your children about saving money and spending
it wisely. They'll thank you in the long run, even if they get annoyed that you
won't buy them that new toy or gaming console immediately.
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