What to Teach Your Kids About Money

One of the best gifts you can give your child is to be sure they are educated about money. Once they move out you will not be able to make decisions for them, but if you have spent time teaching them about finances, they are more likely to make smart choices. Money can be difficult for people to talk about, even among family. It is worthwhile to be a little uncomfortable to ensure your child has the tools they need to make smart decisions.

Encourage Savings

Whether your child gets an allowance, has a job, or gets occasional financial gifts for birthdays or holidays, encouraging them to save some of that money is important. Even if the savings don’t add up too much, it is an important habit to build. There are many high-yield savings accounts available that require no minimum deposit. Seeing the interest add up as they leave the money alone can be a fun exercise. If you are financially able, matching their deposits can be an added incentive.

Help Establish Credit

There is no way to avoid the fact that decent credit is important in today’s society. Poor or no credit makes it difficult to rent an apartment, raises the cost of auto insurance, and can even make it more difficult to find a job. Having credit is important, but it is also important that they know how to manage it. Make sure they understand that they should never put more on a credit card than they can pay in full at the end of the billing cycle. To help establish credit, you can add your child as an authorized user on your cards. Whether or not you give the card to your child for use is up to you, but having their name added allows them to import some of your credit history, when they are ready to apply for cards or loans.

Once your child turns 18, they can continue building on their own. If they are attending college, student cards are a good option. Because these cards are aimed at students, they don’t expect a particularly high income. Many also offer rewards for maintaining a good GPA. Having a good credit score and history when graduating from high school makes moving into adult life much easier. Renting an apartment will be more straightforward, and your child may even qualify for private student loans without a cosigner.

Donating is Important

Part of having financial savvy is making room in the budget for donating to causes that matter. Children are never short on causes they are passionate about, so encouraging this at a young age can create lifelong habits. Everyone’s financial picture is different, and while some people can give regularly to causes they feel strongly about, others may need to make smaller contributions less frequently. 

Regardless of how often or how much is donated, modeling and encouraging this behavior is important. It not only provides resources for a charity in need, but it is also a great way for your child to understand that even small efforts make a difference. You want to allow your child to support his interests, not yours. As they get older, you may want to demonstrate how to look a charity up online to get an idea of how they spend their funds and projects they participate in.

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