There’s no doubt that you want to give a great future to your kids. Have you thought much about their financial future?
Money management for kids can be taught at any age, and it will help you and your kids later on in life. About half of parents who participated in a financial survey said that they were putting their retirement savings at risk to help their adult children make ends meet.
You can stop that pattern by taking steps to teach financial literacy to your children. That will help them create strong financial habits that will carry them to become financially independent adults.
Read on to learn how you can talk about debt and money management.
When to Teach Money Management Habits
The first question that parents will have about money management for kids is when to teach different concepts.
As a general rule, keep things very basic for younger children. For example, a child between 3-5 years old is just developing financial awareness. You can start to teach concepts of earning money, saving, spending, and giving money.
Between 6-10 years old, you can teach them to decide between needs and wants and get them to think about long-term goals.
Between 11-13 years of age is when you can introduce debt concepts into the conversation. You can teach them to set a budget and how they can leverage debt to pay for certain things.
As they get older, you can start to teach them wealth-building strategies.
What to Teach Your Kids About Debt
If your kids are at the age to learn about debt, what can you teach them? These are three important lessons to pass down to your kids.
1. Good and Bad Kinds of Debt
You probably learned that there are good kinds and bad kinds of debt. Low-interest debt can be used to finance a home or car purchase. It can also be used to start a business.
There are also debts that can be useful in emergency situations. Getting funding through title loans is one way you can leverage your car to get money quickly.
High-interest credit cards or high-interest loans are an example of bad debt that should be avoided or used sparingly.
2. Think Things Through
Kids are impulsive by nature because they’re just learning the consequences of their actions. If they take out a loan or credit card, they have to pay it off.
They should learn that they’ll spend more money on interest if they don’t pay off the bill every month.
3. Be the Example
Your kids are watching everything that you do, and they compare that to what you say. If there’s a disconnect between what you tell them what to do and what you actually do, they’ll notice it.
They’ll also call you out on it.
For example, if you tell your kids that you shouldn’t take out a personal loan to finance a vacation and then do just that, your kids won’t develop the good financial habits required.
How you act around money also carries over to your kids. If you’re always anxious and fearful of spending, your kids will notice, and they may develop those same patterns later on in life.
Money Management for Kids
It’s not always easy to talk about money management for kids. The sooner you do, the easier it will be for them to be financially independent adults later in life.
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