Many parents should start discussing finances and money with their children earlier on. These lessons can help to set your child up for a lifetime of success as they better understand how finances work and the best way to handle their own money. Some of the key financial lessons that every parent should teach their children include:
How Earning Money Works
Your child should learn early on how to earn money and where it comes from. Instead of handing them money for everything, set up a series of tasks or chores they must complete each week. Once your child completes the tasks, they get an allowance for their efforts. As they get older, they can find other ways to make money including a yard sale, babysitting, helping the neighbors, or getting a job when they are old enough.
Why Budgeting is Important
Your child is never too young to learn about budgeting. Involve them in the household budget so they understand more about how real money is used in the home. If you give your child an allowance, you can teach them how to manage their funds too. Teach them the difference between needs and wants and how the needs have to take priority in each budget while wants can wait until you save up enough for them.
The Importance of Saving
As you work on budgeting with your child, teach them about saving too. If you have not started your own savings account and gotten into this habit, this is a good time to begin. Explain why savings is important and how it will help to protect the family from setbacks when they occur. Start savings with your children early on. Younger children can use a piggy bank or a savings jar. Older children may be ready for their own savings accounts. Teach them how to save a certain amount of their money back each month to always be prepared.
All About Credit
Do not wait until your child has a credit card in their hand to teach the importance of credit. Talk about how borrowing and repaying the money back and how FICO scores and credit reporting fit into that process. Anytime you use a credit card, you should discuss with your children how you have to repay that money and if it is not done right away, then you owe interest, which adds up quickly.
As your child gets older, you can consider adding them onto the card as an authorized user. This can give them practice with using the card and having to pay it back, taking away the idea that credit cards are free money to use.
Financial lessons are an important thing for your child. The earlier you help them learn some of these lessons, the better prepared they can be in the future. You do not have to teach them all the steps at once. Implementing them a little at a time and in age-appropriate ways is a perfect way to make these financial lessons stick.
The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Paramount Wealth Management and not necessarily those of Raymond James. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Keep in mind that there is no assurance that any strategy will ultimately be successful or profitable nor protect against a loss.