Your kids look to learn important lessons from you every day. Whether you know it, they are watching how you do everything, from how you treat others, to how you take care of yourself, to how you handle money. Here are five things you need to tell your kids (no matter their age) about money:
It’s Always the Right Time to Save
All financial experts agree, there is never a wrong time to save some money. A good rule of thumb is to save at least 20% of income. If you have young children, use their birthday money or weekly allowance as their income. If you have adult children, encourage them to start saving as soon as they can.
Make a Plan and Stick to It
Having a plan for anything increases the chances for success. In this case, teaching your children about budgeting will set them up to do the same when they’re older. Help them understand that sticking to a budget will help them reach their financial goals later in life. You can always use the 50/30/20 rule. Use 50% of your income for necessities, 30% on your wants, and 20% for savings.
Always Be Prepared
The Boy Scouts motto is always a good one. Being prepared financially can be the difference in financial success and financial ruin. Teach them that having three to six months’ worth of expenses set aside in savings, can help keep them out of financial ruin if they lose their job or something unexpected happens. Also having a ‘rainy day’ fund for unexpected minor expenses is a great way to ensure that your child is prepared.
Be Smart, Not Afraid of Credit Cards
Your children have probably watched you pay with a credit card for all sorts of things. The unintentional lesson can be that credit cards can take the place of cash. It’s important to explain that you have to pay a bill each month. For older children, it’s important to explain how credit cards can help. When starting out, credit cards can help establish credit and many have rewards programs that can be beneficial.
Instilling the value of giving back at an early age can be very beneficial to your child. Don’t be afraid to discuss any charitable donations you make, and why you make them. Teaching the values of helping each other is a lesson you’re likely already teaching them, so make sure that lesson translates to financial help as well.