Family Finances: Teaching Children About Money
Provided by the International Finance Corporation
When it comes to understanding the value of money and the importance of budgeting and saving, parents are typically the primary source of education for their children. But for many, finance is a difficult topic to broach. Instead of viewing money as a forbidden topic, you should educate, motivate, and empower your children to become regular savers and investors.
Everyone makes money mistakes. It’s part of life. However, helping your kids recognize potential potholes on the road to smart money management is a wonderful way to hopefully prevent some mistakes from occurring in the first place. The following list illustrates some common money mistakes kids make and the remedies to fix them.
Children should never have more cash on them than they need, simply because it is irreplaceable if lost or stolen. Making sure they have a safe place to keep their money is the key to fixing this money mistake! If the problem persists, try doling out allowances or other funds in smaller amounts, more frequently. Or set up a bank savings account to help them keep better track of their cash.
Get your kids used to paying back what they borrow—and have them make repayments early, before the “due date.” By expecting them to repay the loan, you’ll reinforce that money isn’t free. The same works in reverse: If you borrow money from your kids, pay them back—with interest.
If your child wants to purchase something you feel is unsafe, unhealthy or otherwise inappropriate, say no and stick to it.
If you notice your kids aren’t willing to part with their money for anything (i.e. buying gifts or donating to charity), or if they hoard money, explain that money itself isn’t valuable—it simply allows us to purchase the things we need or want. Helping your kids understand how rewarding sharing wealth with others can be is important to their overall attitude.
Credit Card Debt
Until kids reach independence, credit card usage should be monitored closely. Once they have a card, however, encouraging them to pay off the balance each billing period will help keep them financially balanced. If debt begins to get out of control, encourage them to stop using the card and set up a personal payment plan to pay more than the minimum each month.
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