Teaching your child about handling money is an important part of being a parent. If your child is in college, it is not too late to start but it is wisest to start your child’s financial learning as soon as they have an idea of what money is.
This might be as young as three or four years old.
Here are some tips from the FDOC Consumer News that can help you educate your child in financial matters.
Talk about money and how it works with your child regularly. This would include such things as how money is earned, saved and spent. In a store, talk with your child about the prices of products, how the price of one product is different from the price of one of the same type. Teach your child how to compare to determine which is the better deal. Discuss savings accounts and how the will always be there, earn interest and give comfort in knowing the money is protected by FDIC deposit insurance in case something happens to the bank.
Teach your child about the difference between debit cards and credit cards. Explain that a debit card can only be used when money is in the bank account since it is like writing a check. A credit card is different in that it is used to borrow the amount of purchase and paid later.
Go over your bank statements with your child to help them understand how bank accounts work. Show them how the money goes into and out of your account using the debit and credit columns to show the check and debit card transactions and the deposits, including electronic deposits.
Take advantage of the times of years, such as tax time and health insurance open season, to talk about making important financial decisions. Tax time is a good time to talk about how taxes work to some degree, depending on your child’s age. Health insurance open season is an excellent time to talk about making the best decision on choosing the best policy at the best price.
Give your child an allowance as a way of teaching your child how to manage money. This gives them hands-on learning about making financial decisions. First talk to your child about spending some now and saving some to buy something bigger at a later time. Talk about how to consider carefully before buying something as it might mean not being able to buy something else that is also wanted. Open a savings account for your child and help them go over the account statements to see how the money is building up. Though it is up to you, tying your child’s allowance to doing chores is something to think about as it will teach your child about earning money rather than it just being given to them.
When choosing to give your child an allowance, be sure to make it clear that if your child runs out of money before the next time allowance is paid that they will not simply be given more money. This could result in your child not taking money management seriously as they will think they can always get more money if they spend it all and would sabotage your efforts in teaching your child to save, spend wisely and learn self-discipline.
If you teach your child good money management skills before they face making financial decisions on their own, your child will be less likely to make poor money management decisions as adults.