Adults are faced with a number of financial tasks including budgeting, paying bills and saving for retirement. When they have kids, people become responsible for a lot more juggling and dollar stretching. For this reason, it is important for parents to instill an understanding in responsible personal money habits within their children. Fiscal responsibility is one of the most important skills that a parent can teach his or her child, according to financial adviser Rita Cheng.
It is certainly unnecessary for kids to learn the ins and outs of the stock market, the complexities of interest or annuities or any of the other in-depth financial concepts. However, if a direct mental connection between time and money is established at a young age, young people are more likely to value their earnings and spend them wisely in all future endeavors.
Lesson One: Knowing Needs
Children are vocal about things they want and need, but sometimes it is difficult for them to know the difference. For instance, an 8-year-old child may insist that she needs a mobile phone because some of her classmates have one. However, at that age, it can almost always be classified as a want. High school students, on the other hand, have lives that begin to mimic adulthood. They are often involved in extracurricular activities, work and studies, making a mobile device a necessary accessory for communication and safety. Of course, family incomes vary greatly, and there may need to be further compromise. If a need is established, parents and children may need to work together to narrow down specific features that are needed, forgoing a fancy new model for something more modest or used.
Lesson Two: Division Daring
Many kids look at a monetary gain as a sum of money that should be spent in one place. Instead of helping a child find the most expensive affordable purchase, parents should encourage him or her to find a smaller item to buy. The remaining money can be used for between investment, savings, charitable giving or any combination of these. Parents can make separate containers for each monetary purpose, which helps to illustrate how the money is being used. Consistency is the key to this system: Any earnings, from employment, gifts or other other opportunity, should be distributed in an identical manner among the containers. This system prepares children for an inevitable future of budgeting by making them put away portions of their income for other uses.
Lesson Three: Shopping Smarts
Both adults and children fall into the thrill of impulse buying; however, it is often wise to sleep on the thought of a purchase. After a bit of thought, the immediate need to have an unnecessary product or service may subside, but true desires will endure overnight consideration. Moreover, it is wise to always have a shopping list. Retail stores are adept at product placement, and many customers leave a store with more than they intended to buy. Clipping coupons and waiting for sale prices is another way to temper young consumers. Saving money stretches earnings, providing children more purchasing power with the same amount, ultimately reducing reliance on interest-accruing loan structures.
by Jaye Ryan, a freelance writer who loves writing about budget tips and shortcuts for Octopus Loans.