Raising financially responsible kids is a lot easier than you many think. The key is to invest the time to teach your kids the right ways to manage their finances. Teach them actionable methods and strategies that will help them learn all of the ropes of personal finance. Here are 3 simple ways to increase your child’s financial IQ.
Teach them how to pay bills
If you want to raise a financially responsible child then you need to get them acquainted with bills as soon as possible. I am not suggesting that you throw them into debt! You should however teach them the importance of paying their bills in full and on time. One of the ways to do this is by either having your kids get a job to pay some of their own bills or giving them an allowance and having them pay some of their bills with it.
For example, you could shift the responsibility of paying the cell phone bill to your child. They would be responsible for making payments on their bill out of the money that they have been allotted. This way they learn to effectively manage their money by paying their bills first and then using the remaining portion on personal items and entertainment expenses.
Show them how to create a budget
The best way to learn something is by seeing it in action. You can teach your child about budgeting by sitting down with them and helping them create their own budget. A budget is pretty simple to make and can be constructed in a few minutes. Here’s an easy way to make a budget by hand,
Have them make three rows. The first row would be for income. This is every bit of money that your child has coming in every month. This includes job earnings, allowances, and any other income sources. The next row will be for expenses. These include all monthly expenses like cell phone bills, entertainment expenses, and any personal expenses. The last row will be the net income. This is the money that is left over and can be used to fund their savings accounts.
Give them control of their money
Lots of parents struggle with giving their children more freedom as they get older. Don’t make this mistake. You need to give your child more control over their finances as they get older. You don’t want to raise a financially irresponsible adult. Let your child make more decisions over their finances even if they make mistakes from time to time.
If your child wants to spend $100 of their job earnings on a pair of shoes then you should let them make this decision. They will quickly learn that overspending on personal items will result in a broke bank account. You can use these financial mistakes as teachable moments. Explain to them exactly how many hours they worked to earn $100 and how quickly the money was taken from them. Sometimes the trial and error method is the best method to learn from for finances.
By just taking a few minutes out of your day, you can help to put your kids on the path to long term financial success.
So, how have you taught your children about money? Please share your methods below.