You Can Help Prepare Kids for Unexpected Financial Crises
on Tuesday, October 6, 2020
Financial crises can hit at any age. In fact, a recent study by the Principal Foundation found that more than half of Americans under the age of 30 have already hit their financial rock bottom. Such crises can be caused by anything from mental health to job loss to simply accumulating too much debt. While schools often provide instruction in financial literacy, there are many lessons parents can teach their kids that will prepare them to face a financial crisis.
It’s important for children to learn early on that unexpected issues can arise, especially when it comes to finances. Knowing how to manage finances and build savings can provide them with a safety net that will help them navigate financial troubles.
Financial Lessons for Children
Being exposed to sound financial decision-making at an early age is crucial, and there are many firsthand lessons parents can provide their kids to help shape their future financial habits. Following are eight ways parents can teach their kids about responsible money management.
- Set a good example. Kids are observant and learn many behaviors from their parents. Explain to your kids how you spend your money and why you put off buying certain things.
- Give allowances. Hands-on experience is critical to learning how to use money wisely, but children can’t get that experience if they don’t have access to money. Set aside a weekly amount to give to your children, and help them decide the best way to use it.
- Introduce them to spending. Bring your children with you to the grocery store, and tell them to pick out an item to buy that can’t exceed a specified amount. Have them pay for the item at checkout to introduce them to the process of spending. This will also give them an idea of how far their money can go.
- Introduce them to saving. Bring your children with you to visit the bank and explain the importance of saving money in a bank account.
- Open a savings/checking account. Once your children start earning money, they will need a place to store it that is more secure than a piggy bank. You can help them open their first checking and/or savings account.
- Set goals. Talk to your children about what they want to accomplish with their money. Whether it’s putting money away for their college tuition or saving to buy a car, they will need to know what they want to accomplish so they can put together a plan that will help them achieve it.
- Create a budget. A budget is the plan that will help your children reach their goals. Review their budget with them and help them see how putting a specific amount of money aside each month can help them achieve their goals.
- Teach children to track their spending. Once your children have a budget in place, it’s time to track where their money is going. Make an appointment with your children once a month to analyze their bank statements, so they can see how much was spent versus how much was saved. Then they can determine if any adjustments need to be made to help them reach their goals.
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