Many
adults find themselves constantly deep in debt even as
they climb the
economic latter of success. They seem to acquire a lot of “material
things,” but their financial situation never seems
to improve, and for many it worsens as their income rises.
The reason for this, is because many
adults transfer poor budgeting and spending skills from
childhood to their adult
life. Like most other skills, budgeting and spending habits
start early in life. The earlier you start to teach your
kids about budgeting, and train them to “spend money
wisely,” the better their spending habits will be in
the future.
Listed below, are a simple set of budgeting and spending
rules you can review periodically with your kids:
Live on less than you earn.
This will prevent them from running out of money and developing
a habit of living on credit.
Start to save early.
The earlier you start, the less you have to save per month
to reach your goals. Use our monthly deposit savings calculator
to demonstrate two different savings scenarios. Try two
different scenarios, one where you save $50 per month for
20 years, and one where you save $200 a month for 10 years,
use 6% as your interest rate. You will be surprised by
the outcome.
Create a well thought out spending plan and a budget.
The more you plan in advance, the less your chances of major
spending errors.
Establish long-term and short-term goals for your money.
This will enable your child to establish an account for both,
and save accordingly. Your child should know that they
cannot reach a goal, if they haven't established a goal,
and worked toward it in advance.
Know the difference between a “want”and a “need.”
You can explain to your child that this will prevent them
from purchasing what they want, and then not having enough
money to cover their needs.
Now they have to learn the importance of protecting the things
they have.
Explain the different types of insurances and when each is
appropriate. Explain to your child the consequences if
they pull out of the driveway in an uninsured car, and
it wrecks with another car. Some parents think this is
obvious to the average teenager, but you would be surprised.
Lois Center-Shabazz is the founder
of MsFinancialSavvy.com and author of the 3-time award-winning
personal finance book, Let's Get Financial Savvy! ISBN #0971979502.
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