How to Raise Money Smart Kids
The spending habits of kids are being watched by some of the world's largest corporations. Why is this so? Two reasons exist for this intense interest. First the kids of today will be the consumers of tomorrow. Secondly, this group of the population has the largest amount of disposable income. As the economy continues its strong growth rate and incomes continue to rise parents are giving their children more money to spend.
No other time in history have children been so rich. However, in addition to giving children money, parents must teach their children how to be responsible with that money. If parents do not teach their children basic financial concepts when they are young, these same kids may fall victim to believing that money is an ever replenishing pot-of-gold. So how do we teach our children the concepts of money management? Here is a list to
help you get started.
#1: As soon as your child begins to understand the importance of money, explain the purpose of money. Here are a few ideas to help your child to begin thinking about the importance of money:
·Explain why you need to pay for groceries at the checkout counter.
·Explain how you pay for gasoline at the gas station. (Check, credit card, cash)
·Have your child hand the money to the cashier at the grocery checkout stand. Have the cashier hand the change to your child. (If your child is old enough, have them count the change received)
#2: Play money games with your children at home.
·Give them four quarters and have them purchase a toy from you. For example, say toy costs $.60, have your child "pay" you three quarters and give them back $.15.
·Give your child a $20 bill and have them purchase four items for a total of $15.50. Give them the change from the transaction.
#3: Teach them the purpose of check writing and how an ATM card works. (This activity is usually for older children)
·Give them a blank piece of paper with an amount written on the top of the page. For example, $50 balance and write four transactions that total $45. Show them they have an additional $5 after all the checks have cleared. Secondly, show them an example of the four transactions that total $55. This will teach them the importance of not overspending.
·Use the same example with an ATM card.
#4: Open a saving account at your local bank or credit union.
#5: Teach your child how to use credit cards responsibly. Many kids believe that credit cards are a way to get "free" money. Nothing is further from the truth. Kids today only see their parents giving a small piece of plastic to cashier and walking out of the store with the merchandise. They don't see the huge credit card bills at the end of each month. They don't understand that a bill must be paid. The best way to
help your children understand credit cards is the following:
·If your children are with you during a credit card purchase, show them the receipt and explain that the bill must be paid. Explain, if the bill is not paid, the credit card companies makes charges interest. Remember, credit card interest is a bad thing. (Sorry, but I am talking in kid terms)
·Tell them that credit card purchases are not free money and they should not be used to purchase items that are to expensive. (This leads into the area of household budgets.
·If possible, show them your monthly credit card bill. Remind them of the receipts you showed them at the store during the purchase. This will allow them to make the mental leap from buying the merchandise in the store and
seeing the credit card bill at the end of the month.
·If possible, pay the entire credit card bill. Show your child the outstanding balance and the check to pay it off completely. If you have more than one credit card with an outstanding, select the card with the smallest balanced and pay it in full. Show this transaction to your child.
#6: If your child is old enough, open a limited credit account at a local store or with an online retailer. This will teach your child how to use credit. However, make sure the account has a predetermined credit limit. This predetermined credit limit will protect your child's future credit history if they decide to go on a shopping spree.
The purpose of sharing these activities with your children is to teach them the importance of making the best choices with the amount of money they have available. If they don't learn these lessons while they are young, some kids may fall into the trap of spending their hard-earned money on the "wants" of life and not the "needs" of life.
#7 Open a pre-paid credit card. This provides the
opportunity to establish a credit rating and builds good buying habits for your
Click Here to help them establish a Credit History
In addition, if your kids are currently need help
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