It happens in a blink of an eye. We spend our childhood getting just about everything we could ask for. Our parents worked very hard to give us a good life and to make us smile. If you were like me, you had a room packed full of toys, most of which you didn’t even play with. No matter what toy I had, my mind was always on the next thing. Then one day, it all changes.
Kids have virtually no concept of money. If they want or need something, it’s often provided for us. As we get older, we start to pick up a little more responsibility. Whether it’s your job to clean up after dinner, take out the trash, or vacuum the floors, we start to learn about work for the very first time.
A lot of parents will teach their kids that if they want that new toy, then they must earn it. But often, the biggest lessons of all are rarely taught. We all know as we get older that we must work for our money, but the concept of saving is seemingly lost on younger generations. Whatever they get in, they must spend immediately.
Spending Less than You Earn
According to Forbes, most 20-year-olds aren’t saving their money. They live right at where they can afford, opting for the more expensive car or apartment rather than living under their means and saving that money for later. Forbes also suggests, in their article 20 Things 20-Year-Olds Don’t Get, that young adults should learn how to spend 25% less than they make.
This is especially important when you consider that teens and young adults hop from job to job. They don’t have a steady work or credit history, yet they are at risk of making their financial life much more difficult if they don’t get spending under control earlier in life.
Here are several ways to help your child prepare for adult by teaching them financial responsibility.
1) When they’re younger, buy them a piggy bank.
A lot of kids already do have a piggy bank, but not a lot of parents use it as a method of teaching about savings. Once they start being able to help out with chores around the house, having them earn an allowance. When it’s time to get paid, it would be beneficial for you to sit down with your kid and go over their ‘budget’.
Yes, give your kids a budget! Do they want that new toy? Find out how much it costs and create a goal for them to save at least half of its value. When it’s ‘payday’, show them the money they earned. Discuss with them about how much they want to use right now (let’s say, for the ice cream truck? To get a dessert after dinner?), and how much to put in the piggy bank for the toy.
2) Offer a bonus for extra work.
The idea isn’t just to teach them how to save money, but how to have a good work ethic. Reward them for doing extra work around the house. If their only job is taking out the trash and keeping their room clean, but they start helping do the dishes and taking initiative, don’t be afraid to give extra.
In the real world, they’re going to have to hit the ground running. There will be no laziness on the job or slacking off. Once they know the value of hard work, they will be prepared to go to the extra mile for what they want in the future.
3) Show them how to budget for expenses,
A lot of kids love to go shopping with their parents. You can use this to your advantage by getting them involved in the shopping process. Disclose to them what the budget will be for that particular shopping trip. Sit down and go over what you need to buy. Show them how to clip coupons and find the better deal on items.
4) Teach them how to balance a checkbook.
This is one lesson that rarely gets taught to children. It can be a good way help them understand the importance of having good math skills. When they decide what they want to do with their allowance money, teach them how to keep track of the amount of money they have in their piggy bank and how much they’ve spent on junk.
It can be quite eye-opening for them to see how much money they wasted on things that could’ve gone to better uses. Not to mention learning a basic skill everyone will need to know.
5) Don’t forget about credit.
At every college around the country, credit card companies line up ready to get your kid to sign up. In fact, one of my closest friends told me about how he got into major credit card debt. It started the same way it does for a lot of students. His first year in college, they had tables everywhere for students to sign up.
Of course, he didn’t know a thing about credit cards, minimum payments, interest rates, or building credit. He was young and all he knew was he had a card with a certain limit on it. Before he knew it, he was thousands of dollars in debt and now in his 40s still trying to pay that off. It’s a warning to every parent who sends their kid off without knowing how credit works.