In this day and age, I think many of use have realized the importance of a personal finance education. With job openings at a premium, real estate values still greatly diminished, debt balances running high, and retirement accounts having been sucked dry, many are beginning to understand the failure of our personal finance knowledge.
There may be many parents kicking themselves for not better educating their children about finances and how to manage money when they find these same children returning home to live due to lost jobs, lost homes, or lost savings (if they ever had any to begin with). To ensure future generations don’t encounter the same fate as many of their modern day predecessors, I feel we have an obligation to teach our children as much as we can about personal finance early in their lives.
In my personal opinion, it’s never too early to start teaching your children to be responsible with their money. Children can be incredibly money savvy, even at a young age. Starting with simple aspects of saving such as a piggy bank or savings account may be easy ways to familiarize them with good money management habits. But more than this, communication regarding money and the spending of that money may be even more important. Remember, children are amazing receptors of information, and much of that information is passed along by watching what parents and adults do. Therefore, it is important that a proper example be set by adults, and when money is spent or saved that these same adults explain where the money is going and why. This might also be a good way to question your own saving and spending habits and whether they are actually as good as you think they might be.
So you know the kiddies are watching and wondering about your money management techniques. Now it’s time to teach! But where to begin?
At what point or on which aspect of personal finance you begin the financial aspect of your child’s education may largely depend upon his or her personal interests as well as yours. It will probably also revolve around your personal saving and spending habits.
I grew up with a single mother who was putting herself through school and with grandparents who had suffered through the Great Depression. Their teachings formed an attitude regarding personal finances in me that revolved around efficiency and economizing when it came to spending and making use of what I had.
The teaching process may also be furthering by just allowing your children to be involved with your financial actions. Talking openly and honestly with them, letting them watch you pay bills or write checks, and allowing them to watch you check bank or retirement accounts can be great ways to open their eyes to the real world of personal finances. More than this, playing educational games with them such as Monopoly, The Game of Life, and similar games in which the game revolves around money being used to buy and sell various products can be a wonderful way to start them on the road to financial awareness and build and strengthen family bonds as well.
Putting It To Use
There are a variety of ways in which you can put your child’s financial education to the test while also continuing the learning process. It may be that you feel your child is ready to put their allowance or saved money into a savings or checking account from which they may purchase incidentals for themselves such as food, treats, clothing, and similar miscellaneous items. Such responsibility can grow their personal finance education while making them feel as though they have some control over how and where their money is spent.
Similarly, having them sit with you when you are reviewing bills, credit card statements, credit reports, and related documents can better illustrate to them where your money, and eventually their money will one day go and how it is spent. When doing this, consider showing them the good with the bad. Teaching children the effects of high interest rates, fees, finance charges, late payments, showing them collection letters, and pointing out similar financial faux pas may better enable them to see at an early age the costs of mistakes when it comes to financial responsibilities. In doing so, hopefully your child will understand more about personal finance, be prepared for the future, and make fewer mistakes as they transition to adulthood.
The author is not a licensed financial professional. The information provided in this article is for informational purposes only and does not constitute legal or financial advice. For financial advice, readers should consult a licensed financial advisor. Any action taken by the reader due to the information provided in this article is solely at the reader’s discretion.