There is a lot of complaint about the lack of financial education being provided to the younger generations. Personal Finance 101 is not a required high school or college course, yet the financial status of an adult is highly dependent upon the lessons learned about money from a young age.
It most cases, the responsibility of personal finance lessons is
naturally assumed by the parents. While it is true that parents have a duty to
guide their kids into adult life, a real education about real-world financial
matters would also not be a bad idea. But finding such courses is not likely,
especially since it is important to start kinds on the right money path from a
very young age.
Here are some of the most important things we can teach our own kids
about financial matters broken down into age groups:
Pre-School
Savings is a good lesson for the youngest kids. Give a child a piggy bank and
allow them to collect the loose change in the sofa cushions to save in the
bank. Even at this young of age, children can be taught it is important to save
money rather than spend it.
Tweens
For older elementary school kids, it is time to start a bank account. Discuss
with the child the basics of a bank account and why it is important to put
money into the account on a regular basis. Encourage kids to put a portion of
money they receive as gifts for holidays and birthdays into the account to
teach them the art of paying yourself first. Tweens can also learn how to enter
data into a savings account register and review bank statements for accuracy.
If parents are open to using cash as a reward for household chores or odd jobs,
part of that money should also be deposited. Allow kids to spend part of their money
for the items they want. Parents can still cover the basic expenses but kids
should start learning financial independence for their wants. This will begin
allowing a child to understand the benefits of responsibility and money
management.
Teens
Teens can carry on the lessons learned as younger kids - paying for the things
they desire. However, teens are also inclined to want bigger and more expensive
things including a vehicle, spending money for dates, and higher-priced
technology. Parents can encourage teens to take a part-time job and earn a pay check. Older teenagers can be taught the fundamentals of credit card usage.
While kids younger than age 21 can not typically get a credit card of their
own, they are certainly headed in that direction. Parents can add kids as
authorized users on a credit card account and then discuss the rules of
spending on credit.
Lessons detailing the way credit cards work, how much interest really
costs, and the importance of making on-time payments for the balance due are
all vital details an individual preparing to leave home should learn. Another
important aspect of personal finances kids at this stage should become familiar
with is a budgeting. Teens that have regular income and expenses such as
gasoline, credit card payments, and entertainment funds can learn to add up and
categorize their finances on simple budget worksheets. Creating this visual and
establishing a reliance on a budget will also help carry older teens through
their college years.
College Age
Even young adults ready to leave the nest still need the financial guidance of
their parents. More in-depth discussion about finances can include discussions
on the responsibilities of student loans, maintaining creditor accounts, and
the importance of a credit score. Those who have established credit should be
shown copies of their consumer credit report and parents can review the details
concerning their credit score. All of this information will be important after
college graduation and it is important for those about to enter the workforce
to be fully prepared.
Life After College
When starting out on their own for the first time in the real world, kids will
still rely on parents for the important details of adult finances. In
particular, they should clear on loan practices when they need a car; mortgage
procedures when they need a home; income requirements and retirement strategies
when they get a job; and other relevant details concerning financial stability.
While some children will begin to form their own opinions and financial
strategies separate from their parents, many will still rely on their parent's
advice when struggling with first-time money decisions.
Monkey See, Monkey Do
Many parents will hesitate to reveal personal financial information to their
children which can be a mistake in the long-run. Kids traditionally follow in
the footsteps of their parents and imitate the financial lessons they learn
through observation of their own family life. If these perceptions are not
accurate and parents do not make a concerted effort to teach children important
financial facts, their offspring could end up burdened by debt simply because
they were not taught the concepts of money.
Consider how children view a parent's financial situation. Money comes
out of magic machines and small pieces of plastic let us take things from a
store. While financial concepts can be complex even for informed adults, it is
best for them to have the basic fundamentals taught through the different
stages of their life so when reality sets in they will be well-equipped to face
it head on.
Parents also need to remember that no two children will take away the
same message from financial lessons. For some kids savings will come easy while
others may have a difficult time dealing with money in a logical way. The key
idea is to incorporate real-life money lessons to individual children in a way
that makes the most sense. Some kids can learn a great deal from worksheets and
written information while others need to have a visual before understand even
basic concepts of money management. Luckily there are a lot of tools out there
for parents to use to help provide their children with quality personal finance
lessons.
Article by Steve Dowell
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