How to teach kids about money
FINANCES – one of our CORE4 Skills
Not knowing the basics in money management early in life can have a huge impact well into adulthood. Teen expert Amy Morin at About.com, recommends holding frequent conversations about finances and provide plenty of hands-on learning opportunities to ensure your child understands these nine money basics:
How to Earn Money
If teens are always given money, they won’t understand what it takes to earn a paycheck. Rather than handing over money for your teen to go to the movies or buy new clothes whenever he wants, provide an allowance for completed chores only.
How to Save Money
Teens also need to learn about how to save money. Help your child establish goals – like purchasing a new phone – and then assist him in determining how much money he’ll need to save each week in order to make that purchase in a reasonable amount of time.
How to Invest Money
Teens are often surprised to see the power of making wise investments. One way to begin teaching about investments is by providing matching funds. Similar to the way a company may offer a match for retirement savings, agree to match the money your teen is able to save during a specific time. For example, match your teen’s savings toward new basketball sneakers over the next two months or provide a match toward the purchase of a car over the next year.
How to Create a Budget
Unless your teen knows how much to save, how much to spend, and how much is earned, he won’t be able to make wise financial decisions. Whether your teen has a job, or he earns an allowance, teach basic budgeting skills. Hold regular financial meetings and review your teen’s spending and help him decide how to divide up his money.
How Credit Works
Teens see adults swiping credit cards and they overhear discussions about mortgages or car loans, but most of them don’t really understand how credit works. Talk to your teen about the dangers of debt and the importance of paying off credit cards and other loans in a timely manner.
How to Balance a Checking Account
Assist your teen in opening up a checking account. Teach your teen how to write checks and how to balance a checking account. If your teen is going to have a debit card, make sure he knows how to use it responsibly by tracking his spending habits.
How to Pay Bills
Show your teen some of your bills and discuss how you pay them. It’s important for teens to understand how to recognize when bills are due and how to develop a system to ensure they’re paid on time.
How to Manage Bank Accounts
Today’s digital world means many teens have never even really been inside a bank. Direct deposits and ATMs have largely done away with the need to speak with a bank teller. Teach your teen about the difference between a checking account and savings account. Discuss how money can be transferred between accounts and discuss various types of fees banks charge.
How to Spend Money Wisely
Learning how to spend money is an often overlooked financial skill, but teens need to know that spending their hard-earned money isn’t bad. But many of them become so frightened about running out of money – because they don’t have a clear understanding of how to budget – that they don’t want to spend any cash. Teach your teen that it’s okay to enjoy spending money, as long as the purchases are part of the budget.