If you are a parent, one of your primary goals should be to teach your kids about money. Regardless of your childrens’ ages, it’s never too early to show them how to handle finances in a responsible manner.
Teaching your kids about money is easier said than done. This is especially true if you are struggling with financial issues.
Whether your financial skills are strong or weak, you can show your kids how money works and how to manage it. Here are a few real-life finance lessons that you can share with your children.
1. Teach your kids about the lending process.
Borrowing money is something that your kids when encounter as adults. Whether they need a secured lending option to purchase a car or an installment loan, it’s likely that your kids will have to make sound loan decisions at some point in their lives.
One real-life finance lesson that you can share with them is how to borrow money. Here’s an example that you can apply in your household.
When your kids borrow money from you, create a contract with terms and conditions. Include the installment due dates, interest and installment amount on the loan.
After they borrow the money and sign the contract, collect each installment until the money has been repaid. If they don’t repay the money on time (or at all), repossess the property until they repay the loan.
2. Take your kids to the grocery store.
There’s no reason why your kids shouldn’t be involved in your family’s financial affairs. After all, the financial well-being of the family affects them.
Create a budget for your weekly trip to the market. Take your kids with you and allow them to help you shop for the items on your list.
Make this a learning experience for them. Allow your kids to look at the prices and compare the prices of one item to a similar item. This activity will help your kids become conscientious shoppers.
3. Teach your kids how to save money.
When many people get money, their first order of business is to spend it as fast as possible. This is especially true for people who have not developed the discipline necessary to budget and save money.
If your kids haven’t been taught how to save money, they’ll grow up to be adults who live from paycheck to paycheck. Any person who has been stuck in that cycle will tell you that living in feast or famine mode is not a good way to live.
For younger kids, purchase a piggy bank and require them to save at least 20 percent of the amount they earn or receive as gifts. If your children are older, you can open a savings account for them.
4. Let them monitor you as you budget your paycheck.
In the age of technology, it can be easy for kids to develop a distorted view about money. Some kids don’t have a good understanding of where the money from the ATM comes from. Take time with your children to show them the process of how you earn and spend your money.
By applying these real-life lessons, your kids can learn how to confidently manage money.