Money Skills Should Be Taught To Children At Home
Unfortunately, we cannot rely on schools to teach kids money skills even though saving and investing are fundamental to responsible and successful living. OlyLife suggests early education about how to manage finances for pre-teens and teens can make a huge difference in how a child grows to handle money as an adult.
Important Money Lessons:
- Money Does Not Grow On Trees. Even though you may be able to afford to give your kid everything he or she wants, it is important for children to learn the valuable lesson of “No” or delayed gratification. When the spigot of money does not flow continuously, your youngster will get the idea that money is valuable and should not be wasted.
- Saving For The Future Is A Must. No matter how small the amount of money a child receives, if they learn the requirement of taking a percentage of the savings and putting it away for their future college education they will get a couple of key lessons. First, college is something very important and expensive that is worth saving for. Second, whenever they receive money it is important to set aside some for their future.
- Giving Is Good. When children are taught that money is valuable and that they should be thankful to God for it, it will make sense for them to share a percentage with their church as well as give to those in need. These life-long lessons are shaping their perspective about money. Not only will these children learn to have a grateful heart, but they will also learn valuable lessons about having compassion for the world around them.
- Short Term Desires Require Savings Discipline – A portion of savings should be used for things that we want but cannot afford until we have saved for them. In addition to long term savings, kids should learn how to save for the new skate board or that used mustang.
- The Power Of Investing And Compound Growth – Young people who learn to save money for college and retirement by investing both gift and earned money in a broadly diversified total stock market fund with reinvested dividends, have the potential to reap good rewards forty years down the road.
- Retirement 401K and Roth IRA Plans – When young men and women entering the work-force are knowledgeable about tax advantaged long term retirement plans they are more likely to begin investing right away. These early investments can make a huge difference as opposed to starting to save for retirement when they reach thirty.
- How To Handle Checking And Banking – Learning a responsible way to use a checking, debit/atm and savings bank account both on paper and online is a basic skill that should be in the teenage years before college.
- Budgeting – There are excellent tools from Intuit that can help a teen build a budget. They can plan out how much of their allowance they will give, save, invest, and spend. Detailed tracking on how they are spending against plan will will help kids learn important money skills.
- Income Statement – It is not hard to learn how to build an income statement, but you would be surprised how many people have never been taught to put together a one page document on how much money they make and spend in a year – with quarterly or semi-annual reviews. This is an important way to see what is happening with money over time and whether the life-style is above or below their means. The lesson is that the more we can live well within our means, the better off we will be.
- Balance Sheet – A teen should grow up with the knowledge that their balance sheet is never more than ninety days old. This is another easy tool to put together. A balance sheet should be updated regularly to show assets such as savings cash, car, investments and liabilities such as loans. The combination of assets and liabilities leads to the net worth figure. Teach teens to keep this figure positive and to avoid debt.
Money Skills For All Ages
If you were not taught some of the above lessons when you were younger and you have been challenged with managing personal finances – it is never too late to begin better money habits. Every dollar you earn that you don’t spend is dollar saved that you didn’t have before. So, build the above skills into your life-style and you will be better off tomorrow. In the mean-time, when you teach the young folks excellent money, saving and investing skills you will be closer to making the most of your one and only life – That’s OlyLife!
More Personal Finance Articles