We raise or kids the best we can. We teach them what we think they will need to know to be good people and be self-sufficient. One thing we need to be sure they have an understanding of is personal finance, and it’s never too early to start the lesson.
I overheard a conversation recently while standing in line that had me shaking my head. It was between a young university student and her friends.
“I’m essentially fiscally independent from my parents.”
“Wait, who pays for your car?”
“Oh, well, my dad is paying for my car, and my cell phone, but that’s all.”
How is this fiscal independence? Further conversation revealed that this young woman was also not paying her own tuition. If she thinks she is paying her own way, how will she manage when she really has to do it? This young woman was studying to be a doctor. I sure hope she understands medicine better than she understands finance!
One way to start teaching your child about finances is by giving them an allowance – even very young children can start to learn about money. Make the amount reasonable for their age and let them decide how to spend the money, but once the allowance is gone, it’s gone until the next time. They will learn they need to save more in order to buy something else. This gives your child actual money to learn about and handle.
You can also teach them the value of money by comparing what different amounts of money can buy. Take your child shopping with you and compare the prices of two similar items and talk about why the cost may be different.
When they are a bit older, show your child how much money comes in each month, and how much goes out through the family expenses. How much is left? What happens to that money? If there isn’t anything left, then what?
The point is, get them to understand basic household finances. This will help equip them for the day when they will be on their own and need to be responsible for their own fiscal situation. These lessons can last a lifetime.