Are You Teaching These Financial Habits to Your Kids?
We often wonder if our kids are really listening when we try to teach them about money. Surprisingly, they mightn’t be listening, but they’re always watching. Kids are constantly observing how their folks handle finances and are likely to model those behaviors. That means that both good and bad financial behaviors we model may strike a lasting chord in their futures.
Financial Habits That Can Get Them into Trouble
Abusing Credit Cards
Credit cards are convenient tools when used appropriately, but when used improperly, the result can be long-term debt. Children who consistently witness their parents making unnecessary purchases on credit cards may develop a casual attitude about assuming debt later in life. To avoid this, you have to expose them to excellent financial habits, like paying the balance in full every month. A good reference about this is the Getting Out of Debt Workbook, which teaches you how to handle debt.
Impulse Buying
Kids don’t have a lot of self-discipline, and when they see their parents yield to buying things on impulse, that behavior is reinforced. Learning to think about purchases in advance helps kids build better habits. Tools from Kids’ Money Budgeting Worksheets for Students can help your child understand the importance of thoughtful spending.
Not Using a Budget
Budgets are essential in enforcing some sort of self-discipline on one’s finances. When children grow up seeing their parents do otherwise, they too might do so when they become adults. Introduce them to the basics of budgeting early with guides such as Budgeting 101.
Confusing Needs with Wants
Understanding the difference between needs and wants is central to good financial management. Take the opportunity to teach your child how to set priorities, placing needs before wants. If you need more information, see Money Matters: Teaching Financial Wisdom to Your Kids, which describes a systematic method for imparting this critical lesson.
Positive Financial Habits to Pass On
Consistent Saving
Showing your child the value of saving money from every paycheck can set them up for financial success. You can encourage them to set aside a portion of any money that comes in, whether through allowance or gifts. Things like 5 Easy Steps to Save $4000 In a Year Workbook can be helpful in teaching the value of consistent saving.
Paying Bills on Time
Paying bills on time can be a simple but powerful example of responsibility regarding one’s finances. Children observe much more than one would think, be it a letter postmarked “Past Due” or the calls from collectors. A good example set forth in paying bills promptly can instill responsible habits in them.
Sacrificing for Long-Term Goals
Big financial goals require small sacrifices. Help your child understand the trade-offs inherent in good long-term savings strategies in their effort to balance present self-denial against long-term goals, whether retirement or college. The Top 18 Ways to Throw Away Your Money Workbook provides some helpful suggestions that can enable them to avoid wasteful spending.
Reaping the Rewards of Smart Financial Decisions
One thing financial discipline should do is pay off. Let your children observe the fruits of their savings and, equally importantly, of proper money management—be it a family vacation or perhaps the newest toy they wanted. This helps in imparting, in a big way, the takeaway about how one should manage their money responsibly.
Some additional resources to make use of:
Federal Trade Commission Guide to Credit and Loans
This is indeed a very useful publication, not just for parents, but also for teenagers aimed at guiding them through responsible behavior related to credit.
Practical Money Skills
This site is chock-full of activities, resources, and lesson plans that help to make learning about money fun and simple for kids and adults alike.
By being out in front of our consciousness, financial behaviors we are modeling, will better set our kids on the path to a more secure financial future. For further helpful tools and products, check out the Invest Well Guide store.