Things to teach your kids about money
Prepare them for financial success in the future
Talking to your kids about money is never easy. But if you don’t do it, who will? Personal finance isn’t taught in many schools these days so if you want your kids to be financially secure, it’s up to you to educate them about money.
Start with this talk:
Pay yourself first
And no, we don’t mean buy a TV with your first paycheck. This means putting some of your money away for goals that you would like to reach. Your savings account can keep you out of debt and lets you set aside money to buy the things you really want.
Debt is no fun
Many credit card companies will send you offers for free money. But in reality, they’re asking you to borrow money, which you don’t have. If you don't have the money today, are you certain you'll pay it back tomorrow? That's the problem. Credit cards can be a helpful tool as long as you use them appropriately and avoid borrowing more than you are able to repay.
Little things add up
You could spend $4 on music downloads or a sweet frozen coffee drink every day. Or, you could save that money, which could earn you up to a quarter of a million dollars in 30 years. So you decide: coffee today or a nice house and a sweet car in your future?
Let me show you the family budget
Here’s how much money we make. It may look like a lot, but here’s where it goes. First, look at how much goes directly to taxes. Now we subtract this much for the mortgage, and this much for saving, and this for the car, and this for your college account, and this for food, and for … Doesn’t seem like as much as you thought, huh?
Don’t think of "budget" as a bad word
You need a budget too. And the sooner you start, the easier it will be later. You should track your income (allowance, gifts, cash, lawn-mowing money, etc.) and your expenses (video games, pizza, clothes, etc). Then, you can figure out how to save up for those new sneakers or stereo you want. It doesn’t have to be hard. Here are three steps to make it easy:
- Pay yourself first (put as much of your pay into savings as possible)
- Pay your bills or for the things you need
- Spend no more than what you have left over
Don’t worry about keeping up with the neighbors
Just because the kids next door (or at school) have cool gadgets or trendy clothes doesn’t mean they have a lot of money. Their parents may be deep in debt and unable to sleep at night. Don’t worry about competing. Worry about doing what is best for you.
Money can’t buy happiness
However, money can buy you all kinds of misery and debt. Don’t even try to buy happiness. Instead, try to gain financial security for you and your loved ones, and find happiness with them.
These general guidelines are a good place to start when talking to your kids about money. Remember, keep it simple and fun and they'll be more likely to remember what you said. From here, it’s up to you to answer their money questions and to encourage them to learn more about money and investing. The more they know, the more successful they will be. And remember, they may be taking care of you one day.