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When I played Monopoly, I always had to be the banker. I wanted to pay out the $200 to players as they passed “Go” and collect the mortgage fees. My playtime fun translated over into real life too.
As a child, I relished saving every dollar I could, from spare change in my piggy bank to birthday cash from my grandparents. Not much has changed. And because of that, I’ve always been able to purchase what I’ve ever wanted or needed. But as I’ve watched family and friends, I realize that I’m somewhat of a “rare bird” in that respect. It’s why I’m writing today. You see, I’m passionate when it comes to teaching kids the financial skills they’ll need during their lifetime. It’s something my parents did with me.
I wasn’t going to wait until my daughter was a teenager to talk with her about money. I didn’t even wait until the “tween” years arrived. Truth be told, my kiddo has had to listen to her mom to teach valuable lessons about money since she was young. Doesn’t every little kid have play money and a cash register? It starts then.
7 Financial Skills Kids Must Be Taught Early
As parents, we set an example for our children, whether we realize it or not. This includes a financial example, which can either be positive or negative, but make no mistake that they are watching.
No matter whether you live paycheck to paycheck or have a credit score over 800 (considered excellent), there are financial skills you can teach your children. As they get older, let them hear from you and learn from any mistakes you made. Let them understand what financial choices you made, and any consequences felt. It’s better that kids learn from us that late payments may seem harmless, but in reality, there can be years-long consequences.
So let’s see what financial skills we can teach our kids.
Create and Maintain Good Credit
If you have tweens or teens, do you know what credit is? Why they need it? What they might need it for? No matter who you are, creating and maintaining good credit is something that is important because having good credit means being able to easily get a loan for money when it is needed most – for a vehicle, student loans for college or graduate school, an engagement ring, a house, etc. Knowing if you have good credit (or not) is just as important, and you should teach your young adults to know what’s on their credit report. Lexington Law Firm, the oldest and most respected name in credit repair, believes that everyone has the right to a fair and accurate credit report.
While one certainly doesn’t want to take out a lot of loans in their lifetime, most of us will need a loan or two for bigger expenses like a home. Knowing this when they are younger can help students as they start living on their own, spending and using credit cards.
Start with credit cards, which at a young age, can often kick off someone’s credit history. As an eighteen-year-old heading off to college, I got my first credit card for emergency purchases while away from my parents. More importantly, it’s the same credit card I’ve had ever since. Yes – I still have the same account. Why is that important? It shows a continued, stable, reliable, credit history of payments made. That tells potential creditors I’m not high risk.
Get that first credit card for emergencies. Pay the balance off each month. On time.
Get the Help You Need
I know many who have made mistakes in their 20s and 30s. From friends who loved to shop a little too much to others who struggled making payments on time. There were consequences, but teach your kids – don’t wait to ask for help. Whether it’s advice from mom and dad or professionals at Lexington Law Firm (or best choice – BOTH), it’s crucial to get the help you need, sooner than later.
If you (or your kids) need help to repair credit, look no further than Lexington Law Firm, which offers packages you’ll appreciate. They have relationships with all three credit bureaus: Equifax, Experian, and TransUnion. They are professionals who know just how to get errors removed and do the work their clients need.
Common Financial Experiences
As parents, it’s so much easier to handle everything. But if we handle it all, we raise children who become young adults, not knowing how to function well in the real world. That too often comes with a hefty price tag, one that young adults spend years trying to get out from under.
Let kids experience things like…
Buying items with cash. This is great for so many reasons and forces them to learn how to make a change (a skill I see many employees struggle with).
Purchasing school lunch with an account. This can be treated like a first debit card of sorts. There is money in the account, but they control it by their spending, and it’s monitored by parents.
Going to the bank with you to make a deposit. So many of our transactions are done online these days, but there is something to be said for a child physically walking into a bank to help them understand the inner workings.
Using your credit card at a grocery or retail store. Every credit card machine is different, so let them figure out how to work through that with you standing there.
Using coupons (whether clipped out or digital). This helps them understand value.
Shopping for a needed item. Once again, this helps kids learn value and how the same item can cost different amounts. Bargain shopping!
Using an ATM. Something that is practical both at home and while traveling internationally. Kids need to learn early on that money taken out is depleting an account.
How to Balance a Checkbook & Manage Their Own Affairs
Now, this might seem like a no-brainer, but let me ask you if this was something you were taught in school. Were you? I wasn’t. It’s usually up to us as parents to help our kids understand this seemingly simple task.
Now I know what you are thinking. You can set up your account online so you can see everything and “KNOW” what your balance is at any given time. While this is true, and access to that is quite helpful, this is something everybody who manages money should know how to do without an app or online account. Plus, mistakes are made, and if you are balancing your checkbook, you will discover it.
Teaching kids to watch their money in a checkbook also teaches them to manage their affairs. Adults can get into plenty of problems when they rely on someone else to take care of financial matters, whether it’s an advisor, spouse, or trusted friend.
Live Below Their Means
I remember my father always saying you should never buy a house more than four times your salary. It was his rule of thumb, and I stuck to it as I was in my 20s, single, and on my own. That first house was one that I bought on my own, having secured my home loan thanks to good credit, without help from my parents.
The cost of that first house in total wasn’t even twice my yearly salary. I would have no trouble making payments, and even paying it off early. My parents taught me to live below my means and not spend all that I could. That piece of advice has served me well.
Most importantly, teach kids not to put anything on a credit card that they don’t have the money for unless it’s an emergency situation.
How to Budget
Not spending all you have. It’s critical to a successful future. It often starts with figuring out wants versus needs, something kids can learn easily as you shop with them. Unless you teach them the difference, they may struggle with it as adults.
Budgeting is a crucial part of this. So is knowing the difference between fixed expenses and variable expenses (and making plans allowing for those each month).
While you can have teens help with budgets during back to school time, younger children can learn too. In fact, one year, my brother-in-law “gave” each of the kids in the family a certain amount of money to help a charitable organization. He had a brochure with different ways to help out (costing different amounts of money). Each kiddo then had to decide how to break up the money he/she was given to help. It was a great cause, but an even greater lesson for all the kids involved. Whether it’s the grocery store for food or retail store for school clothes, let them help with budgeting.
Plan for the Future – Saving/Investing
When kids get “birthday money,” they often want to rush right out and spend it all. It’s important to teach them the power of saving (and investing as they get older).
Talk to them about emergency savings and how important that is for unexpected situations like health problems or the unexpected loss of a job.
Financial skills are just as important, if not more important than other skills our kids are learning. Be the person they come to with questions about money. Teach them some of this that doesn’t come naturally. They’ll thank you later on.
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