5 personal finance tips you can teach your children.
Financial literacy is important, yet it’s something many folks don’t learn about. You are trying to change that for your kids, which is a good thing. You can share the following five financial tips that your kids can use as they grow up.
One important lesson to teach your children is about budgeting. The reality is money doesn’t grow on trees, and this reality makes budgeting even more important. Your kids are probably going to work hard for every dollar, so knowing how to manage it is going to be quite helpful.
Properly budgeting cash is going to help them save for a down payment or help them deal with an emergency and much more. There are a lot of ways you can teach them to budget, from online classes to books that you can get from libraries. If you don’t know how to budget yourself, then what better time than now to learn along with your children.
Taxes are inescapable, and your kids should know that. You don’t want them growing up to resent taxes when they are essential. People collectively agree to pool their money together to sponsor things like Social Security, the army, local police, and much more.
Learning to appreciate taxes is a good thing because it makes it easier for your kids to make a plan to pay their taxes when they are due. Appreciating taxes might help prevent them from becoming indebted to the government. If you want, you can tell them what might happen with tax debt, from wage garnishments, and much more. You can also tell them how to solve this by using things like IRS tax debt relief or by saving money.
Understanding loan debt
Loan debt is out there, and your kids are going to be exposed to it at some point. If your kids don’t fully understand debt, then they should learn it from you. Mortgage, auto loans, and credit cards are a part of society. Your kids will have access to these things.
It’s important to tell your kids that debt is not something to treasure. It shouldn’t be something to get into because you are impatient. Being in debt ties up your money and puts pressure on your life. With debt, you can’t lose a job or cut your hours at work to pursue a dream because you’ve got obligations to deal with. These are the kinds of things your children should understand about debt, which should encourage them to be careful.
Needs vs wants
Your kids need to learn the difference between needs and wants. Knowing the difference could prevent them from making mistakes with their money as they grow up. Needs are things you need to live and the kind of items you spend money on. This includes food, clothing, and health. Wants are things you know you don’t need. A few wants are nice, but buying too much can cause issues.
Sometimes, wants are easy to identify like a toy, which is not necessary to live. Things can get a little more complicated with other purchases. Create a game for your kids to help them identify needs and wants so that they know the difference between the two.
Yes, your children are quite young, but that doesn’t mean they can’t learn what retirement is and why planning for it is important. Try to show them why it’s important to think about retirement, and don’t be afraid to make it personal. Share your fears with them. Tell them that as you grow older you may get more tired. Tell them whatever you think will help them understand.
The more honest you are with your kids, the more they might understand. Teach them about the ways they can save for retirement like using a 401(k) or using an IRA. If your kids are too young to understand some of these terms, start with a simple savings account, but try to teach them about the different types of retirement savings accounts as they grow up.
Consider enrolling your kids in a financial literacy class at some point so that they learn everything they can from there. Learning to manage money well will keep them financially safe in the future, which is a good thing.