Personal Finance: How to Teach Your Children About Personal Finance

Personal Finance: How to Teach Your Children About Personal Finance

Not many adults were taught to handle money by their parents. It is most often picked up by trial and error and watching other people. The best way to learn about personal finance is to have someone with a little knowledge give you instructions.

Parents are the natural source of this information if they will take the time to teach it to their children. If you are uncomfortable about this task, you may need to find some instruction for your own finances before teaching it to your children.

Start the teaching early.

Like any other training that you want for your children, you need to begin implementing financial training at an early age. Children do better when they view their habit patterns as something they have always done.

If your child is able to count to three, you can probably start teaching him or her about money. Very few children make it to age four without already understanding what a nickel, dime, or dollar is. By that age they can understand simple applications for money handling.

Be age appropriate.

Five year olds do not need to be taught about mutual funds. A teen can handle most of those concepts easily. Start out by teaching your children about saving, spending, and giving. These are the three pillars of financial management. Most people only teach young children about spending. A few teach only saving. Very few teach a balanced approach.

Give them guidance with the money that you give them.

Whether you lean toward work for pay, giving an allowance, or a combination of the two does not really matter as much as some people like to imply. No matter what method you employ to give cash to your children, you need to help them manage it.

Use this cash to guide them regarding how to divide up money for various purposes. This teaches them to put some money back for the future while using a portion to take care of current needs and wants. Learning this type of discipline with money will serve them well for their entire life.

Teach them about giving and saving.

If you only teach children to save or to save and spend, you can cause them to become selfish and greedy with money. Whether you give to charity or a church, teaching giving helps your children view money as gift for them to use for themselves and to help others. They do need to learn the value of saving. This will help prevent future debt issues and instruct them to sometimes delay gratification until they can afford it.

Get them a checking account early in their teen years.

Once your children reach their teen years, you can introduce them to a checking account. If you have worked to instill responsibility with money, only minor monitoring should be needed to keep this account in the black. Along with opening an account, you need to cover how to reconcile the account and keep an accurate checkbook ledger.

Help them set and reach financial goals.

Young children can be taught to save up money for a special toy or treat. Older children may want to save up for a bicycle or larger item. Teens will want to save toward a car, college, or even start some small retirement accounts. Saving needs to be targeted toward short term benefits and longer term cash accounts. Learning to save simply to save can give huge dividends later in life.

Help them learn to make a simple budget.

Eventually, your child will take on living costs. This may be tickets for school functions or other events. Older teens may pay for their car upkeep and insurance. As soon as these types of things come into view, sit down with your child and design a budget.

Having them learn how account for incoming and outgoing money raises the management of their funds to a new level.

Once budgeting is mastered, it will no longer matter how much money comes in. Your child will have the skills to control and direct it. He or she will always know where the money came from and where it went. This is a big step ahead of many adults.

Teach them negotiation skills.

The price of almost everything can be negotiated. Sometimes the key is to get the right person in front of you before you start to bargain. In large stores, you need the store manager and a good reason to negotiate. If you are buying several outfits at the same time at retail, you can probably get a better deal if you ask for it.

The cost of items like large appliances and furniture can be always be negotiated.

Take your children to yard sales and flea markets. These are the easiest places to offer less for a product and get a price reduction. Teach your children to have the cash ready to spend before starting to work out a deal. People are frequently swayed easier by having money waved under their nose.

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