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 paycheck. 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.
