One of the most important things to teach children before they move out on their own is how to manage money. If a person is horrible at managing their money then they are just set up for failure from the start. This is definitely not a lesson for someone to learn on their own.
Children need to have the chance to learn how to manage their own money from the time they’re very young. They need to learn that checks and ATM cards are worthless without money in the bank to cover them. They need to clearly understand that credit cards aren’t just a free source of money. They also need to learn how to save and budget as well so they do not get behind on bills.
Many teens, college students and even young adults slip right into living off credit cards. They apply for a credit card, get approved, and then go and max it out. This is a very quick way to drive down their credit score and pile up debt that they’ll be paying back for years to come – at a painful interest rate no less. Young adults need to understand that credit is okay to be using in emergencies and when it is not an emergency then it should only be used when there is money to pay it back within a reasonable amount of time.
It is very important to teach children how to balance a check book. They should always know how much money is in their account. This way they won’t run out of funds unexpectedly and be unable to pay their bills, or to bounce checks and incur bank fees. Too many young adults fail to plan ahead and set up a budget. They spent too much on non-essentials and find themselves unable to pay for rent or food. They need to learn ahead of time that they have to pay for the essentials first before they allocate money to other things.
It is also important to teach children to save. Savings should be a regular part of their budget and should be deposited into a savings account for kids regularly. It is good to have AT LEAST six months worth of savings in case of an emergency situation such as a car breaking down or even the loss of a job. Too many young adults run into problems and have no safety net. They call on their parents to bail them out, but at a cost to their independence. Besides, mom and dad might have not have the money available to help out.
Parents should help kids learn to save early. Start with a piggy bank and then move up to a savings account when they’re ready. Give them the opportunity to earn money by doing chores. Let them pick out something that they really want to buy and help them establish a goal for saving towards that item. This will help teach them the process of saving. Then allow them to go out and make that purchase once they have more than enough saved up. This way they still have savings left over and it will teach them to not spend all of their savings all at once. Once a child is old enough to understand math then allow them to start using a check book to keep track of their purchases. This will show them the process of budgeting and keeping track of their earnings.
Many banks offer pre-paid debit cards for young people. This will help introduce them to the world of electronic cash. They’ll learn that a plastic card is only worth the cash behind it. Remind them to keep track of their funds and to be careful with their savings.
It is never to early for teaching kids to manage their money. If they learn how to manage $5 when they’re young, they’ll be better prepared to manage their salaries when they grow up. Money management skills will benefit them throughout their lifetimes and enable them to teach their kids the same skills.
You should be able to find an institution in your local area or online that offers children’s bank accounts. When they’re teenagers, kids should get interest bearing checking accounts, too.
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