Raise your children with the understanding that they are going to have to deal with money one way or another. In today's society, making financial decisions is viewed as a privilege and not a right.
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As such, teaching your children the proper techniques to make sound financial choices is essential. The following tips will help you raise financially responsible children:
The first step is to set the right example for your children. Be frugal with money yourself. Set aside a certain amount of cash each month as a budget for unexpected expenses. If you are living paycheck to paycheck, then do not expect your kids to be any better at managing their finances than you are. Don't talk about how much you make or what you spend it on. Do not buy them expensive toys they don't need. Save receipts and compare them to your bank statements so your kids can learn where every penny goes.
Encourage them to earn extra pocket change by doing chores around the house and give them an allowance based on their performance. This will teach them that earning money takes work and teaches them the value of a dollar.
They should also be taught that if they want something, they have to save up for it. If they would like to go on a trip, let them put away money from birthdays and allowances until they have enough saved up to pay for it themselves. If they want to buy a toy, they need to save for it.
You need to show your children that being financially responsible means that you always have enough money in the bank.
Next, take the time to explain the importance of saving money to your children. Have them open a savings account at the bank and teach them to use it only for emergencies.
When they turn 18 years old, they will receive $5,000 from their parents in their name with no strings attached. It is important to emphasize that this is not a loan but rather a gift. Give them the option to keep the money in the bank, invest it, or even use it to pay off student loans and credit card bills. Explain to them why you chose the $5,000 figure. Let them know that if they ever find themselves in financial trouble, this money will be there for them.
If your children are mature enough, consider giving them a small amount of money each month to manage on their own. Start with an allowance, then move to buying groceries, paying for gas, and other similar activities. Make sure they understand that all of these transactions must be done using cash. After a while, you may want to start letting them handle larger sums of money.
For example, when they turn 16, you could let them buy their car insurance and maintain it without supervision. Once they reach 18, they can apply for credit cards in their name and begin building a credit history.
Finally, help your child build his or her financial resume. Whether your child becomes a doctor, lawyer, or plumber, he or she needs a good reference to get into college or a job.
For most fields, a high school diploma is not sufficient. Your child should take part-time jobs, volunteer work, and internships to develop his or her skills and gain experience.
Even if your child does not plan to go to college, he or she should still create a resume listing all past employment, education, and community service activities.
This will come in handy later when applying for jobs. It may also be beneficial to speak with teachers, coaches, and employers who can write letters of recommendation for your child.