One of the important life skills that parents need to teach their children is basic personal finances. All parents teach their children about money, whether intentionally or not.
Thatâ€™s because children hear how parents talk about money, credit cards and bills and see their financial behaviors, too. So itâ€™s important for parents to model good financial practices for their children. Non-profit Credit Counseling of Arkansas (CCOA) has these additional tips:
- Share teachable moments with your children whenever the opportunity pops up, such as comparison shop together for an item or mention how you are saving to buy something you want versus simply charging it.
- Â Teach your child that money â€“ just like our time â€“ is a limited resource, so it is important to put needs, such as paying utility bills, ahead of wants, such as buying movies or music.
- Give your children an allowance so they can learn to spend, save and give. Children will make mistakes with their money and thatâ€™s okay; we can learn from our mistakes. A $5 money mistake now could prevent a $50 mistake years later.Â
- Allowance views include: Children should work to earn any allowance; children should receive an allowance as part of the family; and a combination of those two.Â Decide how much the allowance should be and what the children are being paid for (chores, extra work, good grades)?
- A piggy bank, or even something as simple as a jar, can be a great way for your child to learn the importance of saving. Encourage your child to set goals and write them down. A savings chart or graph can be a great tool for teens to track their savings progress. You might encourage your children to use â€œThe Three Banksâ€ system â€“ a savings container with slots for saving, spending and giving (or use three separate containers). Thereâ€™s also â€œThe Four Banksâ€ concept, which adds investing or long-term savings. And be sure to take your children to a local bank to open up a minor savings account.
Â What are parents to do whenever shopping with their children for tennis shoes and the parent wants to buy the $40 pair while their child wants the $70 (or more!) pair?
Â One possible solution parents have suggested is to tell the child that he or she must pay the difference between the $40 pair and the $70 pair. The child has to use his or her own money and can learn how hard it is to earn the money and how easily it can be spent.
Another lesson that can be learned is pride of ownership: If a child uses his or her own money towards a pair of shoes, the child will often take much better care of them as a result.
Mark Foster is Director of Education with Credit Counseling of Arkansas (CCOA). CCOA is a member of the National Foundation for Credit Counseling. Visit CCOA online at www.CCOAcares.com
Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.