It’s Never Too Early To Teach Children

Upon high school graduation most teens know nothing about finances, not even the basics.  Yet, most have signed a college loan agreement, and because during the application process, banks have passed out credit cards, most teens are now in possession of one.  But…..

Do they know that a financial mess is about to happen to them?….unless….someone has spent some time teaching them the rules of how all areas of finances should be handled in order to avoid this from happening.

Early in their life, they should have learned that you don’t slide a card into a little machine at the store and in return you get things.  Or that when you go to a bank, fill out a little piece of paper and go to the teller, you get money. What they see with these scenarios is instant gratification…. not a good thing for a child to learn….or believe.

The earlier the better is the right time to teach them.  Start with the basics….. You can’t always get what you want… they should do chores to earn money, and then, save some of it, and not until the full amount is there for the item wanted does the item get purchased. This will teach them how a credit card works.  So that when they do get that first card, they won’t purchase an item unless they have money set aside to pay the bill in full when it comes in.

Open a savings (custodial if age is under 18) account, take them to the bank to add to their account each time they earn money, letting them fill out the deposit slip. This teaches them how to interact with the business world. It will as time moves on teach them about interest earned (albeit small) every cent matters, and that a part of what they earn goes to savings. And seeing it grow in their account shows them the value of saving.

Give them a paper check register…. teach them how to use it.  Set it up as their ‘company’. Each time they receive money (earned, or as gifts), put that figure in the proper column, when they go to the bank to put some in their savings account, put savings in the memo line and subtract that amount, (it’s ‘gone’ from their money left),  the remaining figure is their balance, and if they’re buying a gift for a sibling, show that in the memo and subtract.  They did a chore, add that income with the chore in the memo line and so forth.

This will teach them not only how to use a check register or a spreadsheet later on, but it will let them know, at a glance, that they have to earn money, save some, and spend some…. where it came from and how, and how it can disappear quickly and where it goes.  It also teaches them discipline habits of saving and spending, and the balance of doing so.  It teaches them how to budget…not spending what they don’t have.  Each, in itself a very good lesson to learn early.

Knowing even these few things, having learned them when small children, they will, at their high school graduation, be a little more prepared than their peers who know nothing of finances when heading out in the world on their own.

Knowledge really is power…..  and with the basics learned, they will be more apt to want to learn and ask questions, moving forward only if answers are understood, when life changes occur, like buying a car or a home.

Knowing what you’re getting into before you get into it, is key.