It’s important to teach financial skills to youth and, like learning other skills, the younger you start, the better. To help children with financial decision making that can lead to resiliency throughout their lives, provide them with education. The following list can help.
Seven focus areas to teach youth about finances
1. Budgeting
Creating a weekly budget is a great exercise for kids of any age. Have your children divide a sheet of paper into two segments: money in and money out. For the money in segment, ask your kids to itemize their money sources (allowance, gifts, etc.). In the money out segment, have them itemize expenses into spending, saving and sharing. For younger kids, have them put their money into three separate piggybanks.
2. Earning
When your children ask for money for an impulse purchase, encourage them to earn money to pay for it. By connecting the earning experience to satisfying a want, your children will begin to understand personal choice, goal setting and discipline.
3. Saving
Encourage youth to become good savers. One proven technique is to open savings accounts for your children and match some portion of every dollar they save.
4. Spending
For kids of all ages, spending is the fun part. Depending on your children’s maturity level, you can allow them to choose how they spend their money. You can help them become smart spenders—instilling valuable lessons on personal choice and managing money.
5. Giving
To help children become responsible members of society, start them along that path by having them donate a portion of their savings. Discuss various options to help them determine which causes or charitable organizations to support.
6. Borrowing
If your child asks to borrow money, you may want to help them. Beforehand, explain the potential costs to borrow, as well as the importance of repaying debts in a timely manner and establish a reasonable repayment schedule. Teaching your children about borrowing only what they need and repaying loans as promised can help them avoid trouble later.
7. Investing
Tweens and teens will gain an interest in investing and develop a deeper understanding if you get them started with some stock of their own. Explain the basics like how to read stock market reports. Help them choose a company in which they are interested and buy a couple of shares to follow. Explain factors that can affect stock success, from product competitiveness to the quality of a company’s management.
Financial education can help youth acquire healthy financial habits to enjoy a rewarding and prosperous life. Start your financial conversations today. Someday, your children will thank you.