Knowing about money - how to earn it, use it, invest it and share it - is a critical life skill. Unfortunately, such skills are often given short shrift in our education system and homes.
Recent surveys have highlighted an astonishing level of ignorance in today's teenagers when questions about simple financial concepts are raised. For example, one survey found that only 26% of teens understood credit card interest, and only one in three could read a bank statement or balance a checkbook.
If you don't teach your kids good money habits, who will? The following three "Bs" are a good place to start:
Budgeting.
When used properly, a carefully-planned budget is not about oppressive control; it's about freedom. Start your kids early by inculcating a mindset of thinking ahead.
For example, you might provide a set amount of money each month for clothing and entertainment; then give them the freedom to decide how that money will be used.
One caveat: When it's gone, it's gone. If your son spends his whole bankroll on a video game early in the month, he may end up sitting at home when his friends are enjoying a blockbuster movie. By teaching kids the lesson of careful budgeting before they enter the adult world, they'll avoid myriad financial pitfalls and pressures later.
Balancing.
Every high school graduate should know how to read a bank statement and balance a checkbook. The ATM machine isn't a money tree with unlimited fruit.
Financial decisions have real life consequences. Banks sometimes make mistakes. The regular practice of reconciling a bank statement can drive these lessons home.
Bestowing.
Regular giving teaches kids that "life isn't all about me." Children - and adults, for that matter - are often selfish. By requiring your kids to donate a portion of their income to worthy causes, they'll be given the opportunity to acquire habits of benevolence and to discover the joys of sharing.
Of course, financial lessons need to be age-appropriate. You probably wouldn't ask a five-year-old to balance the family checkbook, but you might help him or her set aside money in a piggy bank.
A high school senior, on the other hand, might be tasked with investing a portion of the family income in mutual funds.
If you'd like additional suggestions for teaching your kids about money, give us a call.
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