Money Talks: Talking about finances with your kids
It’s hard to teach your kids about money when they live in a world of instant gratification. As a parent, you work hard to meet their ongoing needs and they often miss the work behind the scenes. You know better than anyone the work required to meet your basic and less essential needs.
Take the time to unravel the mystery of how you support your family and the finances at stake. By creating transparency throughout your day-to-day
Explain how money works
y transactions, your children will begin to understand how your salary supports their way of life.
Here are some ways to get your kids involved in your tax routines that will help them grasp the value of a dollar.
Teach your kids about income versus expenses. The easiest way to do this is to inform them of the lifestyle expenses you have. Discuss budget items such as mortgage payments, utility billsgroceries, etc. You can even go as far as helping you balance your budget. Allow them to help you with the simple math of subtracting your various bills from your income so they can see what’s left after you pay your bills.
Being aware of your financial habits will give your children a clearer understanding of how money works. It will also give them a better appreciation of why you are saying “no” to their extra spending, and why it is necessary to do so.
Give your children an allowance
Allow your children to participate in managing their income. Give them simple tasks to complete in exchange for a allocation. By doing so, you are giving them basic training on the employment process.
Once they have earned their allowance, discuss with them how they plan to use their money. It’s never too early to pass on the wisdom of economy against expenses. Allow them to talk about the purchases they want and use it as an opening to talk about the importance of saving.
Let your kids spend their money
Although you want to discuss and advise your children on their expenses, it is important that you allow them to have the final say in the process. If you force them to save their money, chances are you’ll miss an opportunity to teach a valuable lesson.
If your children choose to spend all their money, the next time they have a need, you can discuss how they should consider their future needs when spending. This will be a great way for them to begin to understand the savings process. It will also teach them about instant gratification and how it can lead to fleeting satisfaction. Both of these concepts are valuable financial lessons that will resonate with and help your children in the future.
Give your kids ways to earn extra income
Instead of turning down your child’s request for the newest video game or a shopping spree at their favorite clothing retailer, consider providing them with ways to earn extra cash. This will teach your children the important modern practice of “side gigsand the need to work more to earn more.
Be sure to teach them that sometimes extra income is a necessity, not a luxury. Often, side gigs supplement income to make ends meet and are not ways to indulge in fun activities or shopping. Discuss prudent budget management and how it is an important habit that allows adults to spend money on things other than their basic needs.
Share the concept of borrowing
Introduce your children to loan ideas and credit card debt. While you don’t want to encourage your children to go into debt for frivolous expenses, sometimes debt is a necessity for the greater good.
Explain the difference between good and bad debt. Educate your children on the difference between a mortgage and a loan taken out to buy a luxury car outside of their means.
Also consider teaching your children the importance of credit. Emphasize the ability to manage money responsibly when using credit. Lead by example in this area and teach them how to use credit and pay off debt in a mutually beneficial way. For example, if you’re making a purchase with a credit card, discuss your card’s interest rate, the benefits that come with using the card, and your expected repayment schedule.
Explain why credit cards exist and the benefits they have for the companies that offer them. Likewise, explain how responsible use of credit benefits your family and your ability to take out loans in the future. If it’s been a while since you’ve checked your credit report, go to Rocket HQ for free credit report and score.