Money Lessons Kids Need To Learn That They Won’t Get In School
Your kids will come home with reading assignments, science experiments, and papers to write. But one thing that they won’t learn in school is how to manage money effectively. That responsibility falls onto the parents. Emphasize to your kids the importance of spending wisely, so that they will be better prepared when they are older.
- Bills: Teach kids that things in life cost money. Everything that we see and use has a price tag and a value attached to it. Kids have a limited understanding of how much things cost. They recognize that things in stores have price tags, but they don’t know how the price is correlated to the value. And they especially don’t have a concept of things like electricity and water costing money. You even have to pay for the trash to be removed. All of those things in life require money. Explain to them how you balance the checkbook so that they can understand how money comes in, but money also must go out. Teach them the importance of paying your bills on time, and the consequences if you don’t.
- Taxes: The inner workings of the tax system are a mystery to most, but it’s important for you to explain to your child how taxes work. Show them on your paystub what is taken out every paycheck, explain how the government uses it, and the importance of paying your taxes. Start off small by sitting them down with you while you file your tax returns.
- Credit: When kids turn 18, credit card companies flood them with credit card applications. Make sure your child is prepared to make the best decision when looking for a credit card. Explain how paying for things on credit works. It’s not free money, and even though you have a minimum payment on your bill, you should still try to pay off the entire amount. Credit card companies make their money from the interest that you accrue from not paying everything off every month.
- Loans: Loans are something that should be used wisely. It gives you the means to buy the things that you need at the time when you don’t have the funds. You eventually have to pay it back, and you will have an interest rate attached to it. Explain how housing loans, school loans, and business loans work. It’s not bad to borrow money, but there is a slight risk involved. They need to know how to set themselves up to repay their loan. Along with credit, go over what a credit score is. Your credit score tells a lender how trustworthy you are on repaying your loan. The higher the score, the more you can afford to borrow.
- Stocks: The stock market is a driver and a litmus test for how the economy is doing. Teach your kids about responsible ways to invest money into organizations, mutual funds, and bonds. Also teach them how to read the market fluctuations. Help them see how the economy is changing so they can know how to manage their money accordingly.
Give your kids the tools to be successful in life by explaining how to be financially responsible. Give them a savings account to put money into, and help them when making buying decisions. When the day comes for them to make their own financial decisions, they’ll know exactly how to manage their money.