It’s crucial to teach our children about the big things in life. While the school system teaches our children about science, literature, and history, it’s also important to ensure that our children have a thorough grounding in financial management. Not that we need to teach them how to be an accountant, but if we have struggled to get out of debt, we don’t want our children to go through the same emotional hardships when they are older. But this is easier said than done. Educating your children about financial planning isn’t about one approach. And with this in mind, how can we ensure we teach our children the most important points about debt and financial management?
Be Transparent With the Process
You may find it difficult to be transparent, especially when you may not understand every single aspect of financial planning, such as interest. While it’s important to have a thorough knowledge of things like interest we also need to remember how to explain it to our children. Transparency isn’t just great to highlight how it works, but it also can help if you are currently struggling with financial issues. If you are struggling to pay off a certain bill or you are attempting to chip away at debt, it’s important to show your children the process. If you are trying out a new way to balance the books or are using a process like the Debt to Success System, it’s crucial to have your children by your side as you learn to budget and balance your checkbook. It gives them a real insight into what is needed.
Teaching Your Children As Early as Possible
You may think that getting your children to understand debt when they are just entering school may be too early. However, you don’t need to go into the intricacies of debt; you can teach your children the importance of managing their money. Something as simple as giving them pocket money in exchange for helping out around the house that they can put towards a toy is the simplest method for them to understand that money requires work. And even if you feel that you haven’t started teaching them at a young age, it is never too late. Sending our children out into the real world is always anxiety-inducing for parents, and if we don’t have all the money in the world, we need to make sure that our children are armed with the best approaches to manage their finances.
Setting the Right Example
As parents, we need to operate with this in the forefront of our minds. If you really want to teach your children about the pitfalls of debt and lending you need to set the right example. By teaching your children good money management skills, you are helping them to understand what the pitfalls are, but it’s important to practice them yourself. If you forget to pay your bills and misuse credit, you are only teaching your children poor financial habits. When you are paying off debt, it’s a good idea to explain why you are doing what you’re doing.
Encouraging Your Children to Live Within Their Means
A crucial lesson in the modern world. As children will see countless advertisements for toys that encourage spending on expensive products and our children just think of the item they want regardless of cost, this is where we have to help them understand that they don’t need everything that they want. But the idea of pocket money for chores or tasks, and encouraging them to save their money for a big purchase. Because there are so many children that want expensive presents come Christmas time and we, as parents, feel that they deserve it, this can be making a rod for our own backs. When our children get what they want all the time they will only demand more. It’s never too late to encourage our children to live within their means.
Encourage Your Children to Borrow Money but Put Repayment Terms in Place
For older children, borrowing money can be the biggest lesson in financial management. Borrowing money can be a good thing, but it’s important to make sure they understand how and when the money needs to be repaid. For young teenagers, this will encourage responsibility but also make you comfortable in the fact that you will see your finances again. When our children want something that bad but it’s beyond their pocket money, it’s about having a two-pronged approach. You may not have the means necessary to lend them all the money, in which case, going 50/50 with them can help them work towards getting this purchase. They may even have to get a job. But also, if you are able to lend them all of the money, it’s important to act as a big financial institution. And it’s so easy for us as the parents to let things slide, but in the real world, this doesn’t pass muster. It may also help to incorporate the idea of interest because it doesn’t just help your children to see what they have in their wallet. Adding interest to funds can seem a bit cruel, but this approach will give your children that thorough grounding in the real world, especially if you didn’t have knowledge of interest when you were younger (or even if you still don’t)!
It’s vital that our children understand debt and good financial management in many forms. We don’t need to complicate things and we have to remember to be age-appropriate. But it’s vital for everybody to understand that debt can have unpleasant consequences. And what we can do to ensure that our children understand debt can comprise a wide variety of approaches. We know debt can be detrimental to us in so many ways. And this is why we don’t want our children to make the same mistakes and that we follow some of these crucial rules. Debt is something that can cloud our lives. This is why we all need to learn good money management and also ensure that our children have it too.