This is a guest post from Patty over at Working Mother Life.
We have just a short amount of time to prepare our children to be productive members of society. From a very early age, our children watch everything that we do and learn from us. They soak everything up like a sponge.
If you haven’t already been doing so, it is time to teach them some good financial habits before they grow up and leave home. The best thing that you can do is model good financial habits and behaviors, but on top of this, you need to teach them the basics of the financial world.
No one wants their child to get into debt, or to be constantly asking for money for this and that. Here we will cover some of the best tips for educating your child so that they are prepared for college and the responsibilities that come along with it.
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Teach Them the Difference Between Wants and Needs
The first of the good financial habits that parents should be doing is teaching their children that there is a difference between wants and needs. Sure, our children may want the newest video game console that came out over the summer, but is it a good idea to offer them instant gratification on that want? This can actually do more harm than good. Let them know the necessities of life, and that these needs come first before wants. The sooner you can do this, the better. It is hard to break bad spending habits.
Teach Them How to Properly Handle a Bank Account
Teaching your child how to manage a bank account is important. While the minimum age for opening a checking account is typically 18, you can start out by helping them open a savings account. A savings account is a great way for them to learn responsibility. Teach them the good financial habit of keeping a ledger of all deposits and withdrawals, and ensuring that they know the importance of keeping a close watch on their money. Make sure that they are aware of overdraft charges and insufficient funds fees. This can be a tough nail to bite if they go out into the world unaware.
Teach Them the Importance of Saving
Saving for the future is more important now than ever. The future of social security is shaky, at best, and that leaves many people scrambling to figure out a way to save for retirement. You can never start too early when it comes to teaching your child about saving money. A good rule of thumb is to teach them to save a third of the money they get. Whether they get a weekly allowance or have a little side job that earns them a bit of money, putting some money into their savings account is another good financial habit.
You may even open them an online bank account that will earn them interest. Online accounts are a great idea for teens because it can help them avoid overdraft and ATM fees which are a common problem. This will not only give them the opportunity to gain interest on their funds but will also show them how their money continues to grow each month when they see their statements. This is also a helpful way for them to understand how to read and understand bank statements.
Teach Them How to Build Credit
Building credit is very important these days. Just about everything requires you to have decent credit. You can’t even get a cell phone in your name nowadays without a good credit score unless you have a hefty deposit to put down.
Teach them the importance of paying bills on time each month and staying on top of their payments. Make sure that they know that taking out too many lines of credit can actually hurt their credit in the long run. The more they know about building credit, the better. It is also important to let them know that destroying their credit is a lot easier than building it back up.
Teach Them How to be Responsible with Credit Cards
Finally, the last of my good financial habits to teach your child is that it is important for our teens to know how to be responsible with credit cards. Once they turn 18, they will likely be bombarded with credit card offers. Many of these offers will come with high-interest rates and fees but may seem really appealing to your recent graduate.
Having a credit card is not a bad idea, as long as you know how to use it the right way. Let them know the importance of timely payments, not charging more than they can pay, and comparing rates and fees before they choose the card that is right for them.
The more you teach your child about healthy and good financial habits before they go off to college, the more successful they will be during their early adult years. Make the most of the time that you have with them still at home.
You can find more parenting and career articles from Patty over at Working Mother Life. In her free time, Patty enjoys playing with her daughter, doing yoga, and experimenting with new recipes.