The financial success of an individual isn’t automatic. It requires learning basic money management skills early in life. If you’re a parent, you’ll be responsible for teaching basic personal finance to help your little ones succeed financially in life.
Teaching financial literacy to your kids has many benefits. When they know how to manage their money early, they will likely grow up better equipped to live independently. What’s more, they’ll make good financial decisions in life. Your children, for instance, will know what to do to pay off debt quickly or avoid it altogether.
Take note of these tips to help your little ones get started on the right financial footing:
1. Decide Early on What You Will (and Will Not) Pay For
Will you go public or pay for private education? Are you going to enroll your child in private music lessons or save that money for something else? Do you want your kids to save for their first vehicle or are you going to purchase it for them as a gift? You have to know the things that you’re willing to pay for along with stuff that your children should have to pay themselves.
If you need help with this area, get in touch with a trusted financial advisor. This professional will help you come up with a plan that will help you to pay for your child’s needs and reach your other financial goals.
2. Open a Bank Account for Your Kids
Figuring out how a bank works is instrumental to a person’s financial journey. The good news is that many kids’ bank accounts allow account holders to earn interest. This could be through bonus interest (when the account satisfies certain conditions outlined by the banking institution) or through the standard variable rate.
3. Teach Your Children How to Pay the Bills
Many kids grow, go off to college and have a grand time, then graduate without knowing how to pay household bills. They have no clue on how to settle these bills monthly or set up utility accounts for their rented apartment.
While your children are still living under your roof, discuss your household bills with them. Show your kids how much you’re paying for the internet, water and electricity. Let them know that you need to pay for these bills on time to continue using and enjoying these services.
Discussing your monthly bills teaches children never to take the luxuries of life for granted. It also teaches them to expect the responsibility of paying for living expenses once they grow older.
Once your children turn into teenagers, allow them to pay for the bills online or in person. If your teens are earning money from a part-time job, you could even ask them to contribute to the bills. How much they need to chip in is completely up to you.
4. Teach Them to Pursue Multiple Sources of Income
Gone are the days when people working for a single company for decades – then retire with a gold watch or some other fancy jewelry. Creating multiple income streams is a path to a better life and financial success.
As a parent, don’t just stop at encouraging your little ones to do well at their full-time job. Teach them to pursue additional sources of income. If your child loves to draw or design, for instance, they could sell t-shirts online. You could guide them to starting a t-shirt printing business if your kid is interested in becoming an entrepreneur one day.
Whatever income source they decide to pursue, let them know that you support them on their mini business ventures. Also, remind them to have fun as they journey toward financial success.
5. Create a “Dependent Emergency” Fund
Parents should not plan on supporting their daughters or sons into adulthood. If your children find themselves in a tight spot, such as losing their job due to circumstances beyond their control, you’ll want to have resources to help them back on their feet.
This is possible by creating a dependent emergency fund. This money will help prevent your kids from taking up loans that may carry high-interest rates and unfavorable payment terms.
When your children do decide to dip into this fund, remind them to replenish the money they borrowed as soon as their financial situation improves. You could also teach your kids to build a build a personal emergency fund in case they don’t have one yet.
Here’s the good news: if your child doesn’t have an emergency or is doing ok financially, you could keep the money for yourself or give a portion of it for their first home purchase or wedding.
Setting your children up to succeed financially may be overwhelming at first glance, but they’ll learn the personal finance lessons they need to know when you follow these suggestions. Teaching your kids to become financially literate will help them secure a better future for themselves.
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