If you’re like most Americans, you’ve probably been raised to believe that you must “build credit” and incur debt in order to make it in society. However, this simply is not true. Since budgeting and living within your means is not something taught in schools, it’s your responsibility to teach your children how to live a debt free life.
Start ‘em Young!
Teaching young children how to live debt free begins as soon as they are old enough to understand money. Get a piggy bank and have them start saving. Teach them how to save for things they want, like toys, bikes and video games. Don’t allow them to “borrow” from you, or to spend their emergency funds on non-emergencies. Teach them to truly save their own money. Have them put a small percentage of their allowance or gift money in a separate savings envelope or piggy bank for emergencies. This might be an unexpected invite to a party or a book drive at school.
Another way to help children with money management is by allowing them to be involved in your budget. Don’t hide expenses from them, nor income. Show them how you allocate every cent toward bills, debt, savings and entertainment. Help them understand why they can’t have an extra treat at the grocery store or a new toy today – because it’s not in the budget. The more they see you budget your money, the easier it will be for them when they are out on their own.
Encourage Teens to Manage Their Own Money
As your children grow and reach their teen years, they will probably (and should) get jobs. Whether it’s babysitting, mowing lawns or a newspaper route, be sure you teach your children how to budget their own finances. Start by having them set up a budget based on their income and expenses. You may even require them to help out with a bill or two. Then show them how to set aside some for their emergency fund, food and snacks at school, gas money to get to the mall, and shopping for school supplies and clothing. You can also teach them how to start saving for a car, car insurance, repairs and gas money.
By the time your teens are old enough to drive, they should have enough saved up to pay cash for their own car, as well as be able to pay for their car expenses. And hopefully they will have enough in their emergency fund to cover these expenses in case they lose their job.
If you’ve been teaching your children from a young age, or even from their teen years, how to manage money properly, by the time they are adults they will have a good handle on it and more than likely not go into debt as adults.