One of the best gifts you can give your children is financial literacy. This holds true whether you live paycheck to paycheck or have more than enough to give everything they could want and need. Many people who are well into adulthood do not understand the basics of budgeting, credit and financial management, and this can cause them serious problems. Your child benefits far more from learning how to handle money than from being given everything they ask for.
Teach Yourself
If you don’t feel up for the task of teaching about personal finance, you are not alone. In fact, you can use your own mistakes to talk about the importance of managing money responsibly. Educate yourself with books, podcasts, blogs or even classes. You can even learn alongside your child.
Talk About It
In too many families, talking about money is taboo. You should normalize it. They shouldn’t grow up thinking it’s okay to ask their friend’s parents how much money they make, but you should all feel comfortable within the family unit talking about what things cost and what smart spending or saving means. When you go shopping with your child, talk about the cost of things and why you are making certain choices. You can also draw up a family budget and encourage participation, including choosing where some of the discretionary income goes.
Give an Allowance
One of the best ways to learn about saving and spending is by doing it, and you can help them do this by giving them an age-appropriate allowance. They can use this to save up for extras, whether that is in-purchase game add-ons, apps, music, movies or a fun but pricey addition to their wardrobe that you might not normally cover the cost of. Your child will take pride in being able to save up for things they want and purchase it themselves.
Planning for College
For most young adults, the big financial challenge in addition to learning how to deal with credit is managing student loan debt. You can start a college savings account when they are still infants or at any other time in their childhood. There’s nothing wrong with your child taking out some loans toward their education, and paying for part of it can help them value it more, but you don’t want them to graduate with crushing debt either. You can also help by taking out Parenting PLUS loans in your name and can cover some, if not all, of the cost of your child’s undergraduate education. Later on during the repayment period and depending on your financial situation, you may be able to refinance them with a private lender that can lead to substantial savings in your monthly payments.
Help with Credit
Inexperience leads many people into credit problems. When your child is a teenager, see if you can cosign on a credit card in their name. Look for one that has a low limit, perhaps a secured credit card. They can then spend their teenage years learning how to use the card responsibly and pay it off regularly.
I’m a 20-something stay-at-home mother and wife. I have an amazing husband, a beautiful daughter, two loving dogs, and a lazy cat. I wouldn’t change my life for anything! I love to read, listen to music, cook and blog!
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