It is not uncommon for parents to see their children thrive financially. Every parent wants to have a financially successful future for their children. However, most parents either do not develop financial talks with their children.
Or, they give them too much of a lesson that the kids can’t digest. Both of these – no financial talks and too much advice – leave them the children in perplexity. Consequently, they fail to make independent financial decisions moving forward in their lives.
That is why, it is pertinent for parents to develop a well-thought parallel in educating their kids financially without throwing a bunch of advice on their kids. Here are 5 financial lessons – backed by expert opinions – that every parent should teach their kids:
Start “Financial Talks” with your kids from an early age
Debra Redway, an ASU Professor, who gives lectures on good parenting, suggests that financially educating their kids is one of the fundamental responsibilities of every parent. “One way to do it is by starting financial talks with your kids from an early age,” she recommends.
Debra further asserts “some parents do not feel comfortable in having financial talks with their kids. To me, it is a disservice to parenthood, as those kids fail to make financial decisions in life.” For Debra, having financial talks with kids is the fundamental step and foremost financial lesson that every parent must practice.
2. Teach them how to use money
It is unfortunate that most schools do not teach students the functionality of money. “Our schools are not designed in a way t to teach our kids how to use money,” argues Debra. “That is why it is on parents to make their kids financially educated.”
To better teach the usage of money, Debra suggests giving your kids some money and asking them to use it. “Give them $20 and give them the freedom to use it whatever way they want,” she suggests. She goes on to say that once you give them $20, observe how they use it. Based on their actions, teach them the better utility of money.
“If they use it to buy toys, discourage them and teach them that they should not leave beyond their means. And that they must be careful with the usage of money.” Debra concludes.
3. Educate them about retirement plans
Educating your kids about retirement plans is another worthwhile lesson that every parent should teach their children. However, this lesson should be taught at a later stage – as your kids grow and pass high school. Experts suggest that retirement plans must not be introduced to kids at an early age. Since they are “too kid” to decipher retirement procedures, they may confuse it with other financial lessons.
Financially educating your kids is a step-by-step and steady process. That is why parents have to be patient and consistent with the process. They need to make sure that every financial lesson is taught with practical experience and with careful analysis. Consequently, the children will be financially independent as they grow old. They will be in a position to make tough financial decisions.
4. Make your kids familiar with Credit Cards
Another lesson that parents should teach their children is familiarizing them with credit cards. They need to make them understand that credit cards do not give you free money. Rather, these credits add up to loans and the cardholder has to pay them back.
5. Open Credit Card Accounts with their names
Once your kids are familiar with credit cards, open credit card accounts with their names. However, as a parent, you need to thoroughly monitor your kids to see how they utilize the card. Unless they are grown up to make sensible usage of the card, parents need to keep track of usage and constantly educate them.