Practicing Good Personal Finance with Kids

Teaching children the importance of financial responsibility is an important lesson that can help shape their future in a variety of ways.?Adults who have the right money-related skills are more likely to pay their bills on time, make well-researched purchases, and put money away in savings each month. Those who lack a strong personal financial foundation, on the other hand, are more often riddled with credit card debt and spend recklessly.

Parents can do a lot to teach their children about money ? both how to spend wisely and keep more of the money they earn.?The following are three tips on how to teach kids about personal finance:

Go Shopping

Parents can begin the lessons by taking their children shopping with them. A trip to the grocery store, for example, can provide a perfect setting for even toddlers.?Before the trip, make a list of items that need to be purchased. Estimate how much money will need to be spent, and figure in any coupons or discounts that can be subtracted from the cost.

Set Goals

Once boys and girls begin receiving an allowance, parents can teach them about setting personal finance goals.?It?s a good idea to take children to the bank or credit union to open their own savings account. From there, they can make weekly or monthly trips with mom or dad to put away money. It might be helpful to give them their allowance in $1 or $5 increments. When the child asks for mom or mad to buy him a particular toy or doll, the parent can suggest saving for it over a time period of weeks or months.

Prepaid Cards

The finance lesson can continue with teenagers. Use a?prepaid card to teach them about responsible credit usage.?High school and college students can be given the card and told they can only spend a certain amount of money each month. At the end of the month, they will have to pay that amount in full to the parents.

If they try to use the?prepaid card?for something over the limit, it will of course be declined. This embarrassment could be used to begin the conversation about how to avoid a bad credit score.?Children model their parents? behavior, especially when it comes to finances. Parents can help produce financially responsible adults by practicing what they preach and starting the lessons early.

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