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Credit cards and expenses

Many children watch their parents live on credit cards. When they need a new item or have a bill, their parents reach for their plastic card and magically they complete the transaction. Relying on credit cards does little to truly teach children about managing money or being financially responsible adults. Here are some tips on finding ways to teach kids about money.

Teaching the value of money

Schools teach reading, writing and math, but rarely do they cover everyday tasks such as paying bills, understanding budgets, or working with interest. It’s up to parents to do the educating of children in this area. Here are some steps for you if you’re trying to teach your child about money:

1. Start teaching children early about money. The days where children can be completely kept in the dark about finances are gone. In today’s tough times, children need to know that money has to be managed. Some of the ways to do this are to teach children about saving their hard-earned cash. Let them see their dollars accumulate, in either a bank or in a sock drawer. When it's full enough, let them take it to the bank and deposit it themselves. Visual learning is a great way to get a message across. If they see money accumulate, they get an idea of how it works later on.
2. Teach children where money comes from and the correlation between work and pay. Normally children believe that money “comes from mommy and daddy.” When mom and dad are out of cash, normally credit cards take care of purchases. Each and every child should be taught the principle that money comes from work. And then how money is used for purchases. And then how we use things and repeat the cycle. Paying children for out-of-the-ordinary tasks, like helping clean out a garage or attic, can also help them see the value of hard work.
3. Consider offering your children allowances. Experts debate the effectiveness of allowances and whether or not children should be paid to do everyday chores. One way to handle this is to pay children for large tasks that aid the family, but do not pay them for their responsibilities. Their responsibilities can include keeping their rooms clean, sweeping and mopping, picking up their toys and helping with laundry. Conversely, a family having a garage sale can pay their child for keeping things lined up and organized neatly for sale.
4. Make the savings plans interesting. Depending on your child’s age, help them to engage in saving money. For a younger child it could mean decorating a piggy bank. An older child it might help them to save for a bike or other large item.

The importance of finances

With the recession hitting hard, it’s more important than ever to understand how finances work. Children need instruction from parents on the acquisition, saving, budgeting of money, and how credit cards and loans work, and how to manage it all. For the sake of the security of their future, they need to be presented with information they can understand and learn from. Educating children today makes for better prepared and responsible adults tomorrow.

Tags: Credit Cards, finance education, financial habits, manage money, the value of money