One thing many parents forget when raising kids is that kids become adults in training. While babies and toddlers are learning how to use their bodies and gain minor skills, children and teens need to learn how to take care of themselves when they become adults. This includes learning about money and budgeting before they leave for college. Below are a few things you can do to teach them about good financial habits.
Educational apps are one of the best ways to teach your children about money and budgeting in the 21st century. Not only do they learn about budgeting, but they also learn about electronic banking, and they can see how compound interest works, as well as other financial management services.
There are apps like the BusyKid app that has a digital chore chart where parents can add chores and set a fee for each one. As soon as kids complete their chores, parents transfer the payment to the kid. There are also other features to the app, such as investing their funds in stocks, as long as the parents approve the transfer.
Create Mock Budgets
The best way to learn about budgeting is to create a variety of budgets from part-time minimum wage on up. Regardless of their age, you and your child can create a budget master list ranging from housing to entertainment and discover the recommended percentages for each.
For example, housing covers not only their rent or house payments, but also HOA fees, homeowner’s insurance, property insurance, maintenance, home improvement, property taxes, and furnishings such as curtains. The recommended percentage for that category is 35 percent, but how do they want to distribute that 35 percent among those in that subcategory?
Set Up a Bank Account
While creating mock budgets is one thing, putting them into practice is quite another. Once you have a teenager, they’re one step closer to becoming a young adult who’s ready for college. Having their own bank account before they leave for college gives them the experience of managing their money while they still have you nearby to ask for advice. Once they’re out of the house, it becomes much more difficult to watch their spending.
You might want to take them to meet with a financial management advisor for advice on managing their spending and saving. A consultant can take a look at their working budget and their spending and can point out ways they can improve both. They may also be able to give your teen more information about financial opportunities they can look for in the next few years.
Teach Them About Credit Cards
Once your teenager turns 18, they can apply for a credit card, and they likely will before they graduate from college. This doesn’t have to be a bad thing. Having a line of credit can help them build the credit history they’ll need in case they ever need to apply for a loan to buy a car or a house. However, credit cards are only useful if your kids are careful with them. To keep them from getting into credit card debt, teach them how to use credit cards as a tool. Teach them the tips and tricks of credit card management, such as why it’s better to make a payment before the statement date instead of the due date.
When you teach your children about money and budgeting before they go away to college, they’ll be better off. They’ll have enough to worry about while in college, and it’s best to teach them life skills before they have to use them when in college or living on their own. Having money and budgeting skills before leaving for college helps defend against overspending, debt, and other financial worries.