I’m going to talk about money and kids in this article – something that crucial which sooner the better. It’s a priority to make fast and adequate action toward our kids about the art of money management. Before we go through this topic further on, let me share most thing we should know below:
1. Kids should be teach the knowledge of money – better start early.
2. Once kids learn on how the money work – they start or often shows an instinctive conservatism.
3. Seeds planted early bear fruit the same manner.
4. An allowance can be an effective teaching tool.
5. Teenagers and college-age kids have bigger responsibilities.
6. Even investing should be learned early.
Creates allowances for kids.
The most effective way to teach kids about money – pay them!!
Most people might argue this method but – the truth always bitter. Allowance is the best way to teach a child to handle financial responsibility. First of all – they have to know and old enough to count money. The key to a successful allowance is structuring it right from the outset.
Make it clear to your children what kinds of expenditures the money is for, and that they are expected to save some of it. Younger children – ages 7 to 10 – shouldn’t be held accountable for items like school lunch money as part of their allowances, but it’s not a bad idea for older kids and has the added benefit of fewer payments changing hands.
“Remember, allowance is supposed to be a teaching tool,” – “Negotiation skills are an important part of that, which they’re going to need for dealing effectively with friends, teachers and, eventually, their bosses.”
So instead of grimacing when your children hit you up for a raise, decide when the time is right and then engage them in fruitful negotiations. How long since the last raise? Will new expenditures be covered? What amount of the raise will be saved long-term for expenditures requiring your approval?
The most vexing decision on allowances is how much – a decision affected by personal values, family income and common sense. Don’t let your children influence the amount by saying what their friends are getting: Any normal child will bring in high figures.
Essence of saving and spending.
Your kid doesn’t like to save? Try the carrot – and then the stick.
One way to encourage your children to develop sound money discipline is to make savings a condition of their allowances. So try to account for this when deciding on a weekly or monthly figure.
This, of course, means setting a budget – and deciding what to do when children run afoul of their own guidelines.
One answer is to require them to save their allowances in locked boxes. But since this doesn’t teach restraint and you won’t always be around to oversee savings deposits, there are more instructive ways to make the point.
Remind them of these goals to keep them from straying.
The best way to encourage sound spending habits is to exhibit them. When planning a trip to the grocery or discount store, get your children involved in making a judicious list and sticking to it. This will teach them to avoid the bane of all savers: impulse buying.
The time have come – teach them about Credit
With credit-card offers coming as fast as keg party invites, college freshmen need some guidance.
Initially, keep it simple, avoiding frills and extras like overdraft protection; they need to experience the reality of bounced checks to understand record-keeping responsibilities.
Many college freshmen today have credit cards, and if your kid is to be one of them, then this, too, has a learning curve that is best experienced under your tutelage.
Before your kids acquire their credit cards, they’ll need a lesson in how to use plastic responsibly. Point out that this is where most individuals’ finances go seriously awry, and illustrate your point with interest tables that show the damage that 18% annual interest, compounded over the years, can do to their savings potential.
Also, tell them that credit is a privilege, not a right, and that if they abuse it, they will lose their ability to get more.
Advance marking – they must know about Investing
After teaching your children the hard lessons, show them the rewards of self-control.
Once your teenagers get a grip on credit, introduce them to the flip side: investing. After all, that’s when they extend the credit and collect the interest.
Since your teens may have too much money collecting no interest in a checking account, the best way to start is with a money-market account on which they can write a few checks.
From there, introduce them to simple, set-term investments like savings bonds and certificates of deposit. Though returns from these will be meager given the current financial downturn, they serve an important lesson and will build their confidence about investing. Then move further with appropriate approach.
p/s: I’ve been teaching all this thing late in my 20, but the effect was great that I’m glad to learn it – going to share with my children one day – and I’ll make it in their early days.Anyway, that it from me for know – Daaaaaaaaaa