Personal finance is one of the most essential areas where public schools lag behind in. Your children need to learn about money management, financing, investing and more before they venture out as adults. Because it is not reasonable to expect this education to come from schools, it falls on your shoulders as a parent to ensure that your children have a solid foundation in all critical areas of personal finance and money management. Here are 3 tips for raising financially savvy kids.
Financially Savvy Kids
Lead by Example
Children develop their mindset about money as well as their spending and saving habits by watching their parents. For example, if they see you regularly splurge on purchases that you cannot really afford only to struggle with high debt balances shortly afterward, they may likely grow up with the same behaviors and habits. One of the best things that you can do to prepare your children financially for the future is to lead by example. You can expect them to observe without formal lessons, but you also should go a step further to provide lessons as opportunities present themselves.
Show Them the Power of Saving
Saving regularly is essential for financial health now and for preparing for the future. Unfortunately, many adults do not save enough. Without savings, you may find yourself resorting to credit cards and loans when emergencies crop up. You may also stress about retirement and have to work for much longer than you intended before retiring. Adjusting your behavior and becoming a saver are important if you want to lead by example in this area. More than that, open savings accounts for each of your children. Encourage or require them to put a percentage of all windfalls, allowances and cash gifts that they receive in their savings account. Each time a statement arrives, show them the growth in the account balance through new deposits and through interest.
Prepare Them for College
Many parents continue to guide and support their children financially after they move out and begin their college careers. However, they are able to open their own accounts, manage spending habits on their own and even open credit card accounts without your knowledge or blessing. The time to prepare your children for college is before they leave the house.
Once they land their first job, help them to prepare a budget. This may be a bare bones budget at first, but you can also work with them before they move out to prepare an updated budget for their first year in college. Student loans are a common way to pay for education expenses, and some students also use this form of lending to cover some of their living expenses in college. As your teenager applies for student loans and decides how much money to borrow, discuss the power of interest rates. Discuss with them how having good credit will allow them to refinance loans in the future at lower interest rates.
If you are like many adults, you may think back to the financial struggles that you experienced during your first few years as an adult. You may even wonder how different your life had been if you had received a solid financial education before moving out. You can make a difference in your children’s lives by providing them with the knowledge that they need to make sound financial decisions.
3 Tips for Raising Financially Savvy Kids is a contributed post
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