9 Year Mortgage: How to Teach Your Kids to Manage Money
Who is teaching your child about money? If your not, then chances are that no one is. 9 Year Mortgage recognizes that personal finance is not taught in schools and the only way they are learning is by example. Children often do not see their parents paying their mortgage or utility bills; what they do see is a piece of plastic that pays for most of your daily activities. Ask a child where money comes from and they’ll most likely say “Mommy” or “Daddy.”
In today’s society, a lot of kids leave for college having little to no knowledge about managing their money. College students get roped into getting credit cards and a year later it is maxed out, and astronomically high interest rates prevent them from being able to pay their bills. At the same time, their credit scores are plummeting and their financial future is in jeopardy. So how do we stop this ugly pattern? Parents need to step up to the plate and teach their kids how to manage their money. 9 Year Mortgage believes that is never too early to start teaching your children about money. The moment your child starts noticing the connection between money and purchases, you as their parent, have the obligation to teach them the truth about money; the earlier the better.
9 Year Mortgage has created a list of tips on how to effectively teach your children about money.
Where Does Money Come From and Where Does It Go
In a child’s world when they need money they ask their parents. Once their parents are out of cash they go to a box and push a couple buttons and VOILA! More money! It is not uncommon for a child to think that money is readily available, but that notion should not last long. Teach your child where money comes from and where it goes. Let your child see you pay your monthly mortgage or utility bills. Explain to them that you have money because you work and that you can only spend the money that you earn.
Once a child understands that “money doesn’t grow on trees,” it is time to see what they will do with some money of their own. Some parents believe in giving a weekly or monthly allowance to their children, while others believe they need to work for their allowance; whatever way you choose to do it, make sure your child has a little money of their own to spend and save. When you start giving them an allowance you should also set some spending limits. 9 Year Mortgage believes it is a good idea to make them pay for some of their wants like movies, candy, and video games. This way if they spend all their money in the beginning of the week to buy a video game and don’t have enough money to see a movie on the weekend with their friends–tough luck. By using this method, a child will start to know the importance of budgeting and saving for the purchases they really want.
9 Year Mortgage emphasizes one of the most important lessons a child needs to learn: Save, Save, Save!
For Young Children: When your child is younger, have them make a piggy bank out of a shoebox or empty jar while you explain that it will be used to help them save their money. Encourage your child to put part of his or her allowance into the piggy bank every month (this resembles a savings account). To teach them about interest, count the money in their piggy bank at the end of each month, then put a little extra in it to resemble the interest they would have earned if it were in a real bank.
Once you believe your child is old enough, take him or her to a bank to open a savings account with their piggy bank money. After a savings account has been established, take your child to the bank each week or once a month to deposit a set amount from their allowance into their savings account. Each month go over their bank statement to show them the magic of compound interest. If your child is more of a visual learner, 9 Year Mortgage suggests you make a chart together that will track the amount of money in their savings account.
A side note to all of you parents: Did you know that if your child puts $2,000 a year into their savings account from age 21 to 31 and they leave the money there until they retire, that they will end up with more money than someone who invests the same amount per year from the age of 31 to 65? That’s HUGE! Imagine the money they could have if your child starts investing when they’re four with just $10 a month (until they get a job, of course)!
Kids Need to Get a Job AND a Checking Account
When your child reaches the age of 14 or 15, encourage them to get a part-time job, even if it is just babysitting or mowing lawns. Make it a requirement that they deposit part of their earnings into their savings account. Having a part time job will not only allow them to put more money into their savings, but will teach them responsibility, time management, and the misery of taxes. Once a real paycheck comes in, a child will learn what it costs to earn a buck.
Once a child is receiving an actual paycheck, have them open a checking account, even if you have to co-sign for it. This will be a place for them to make their deposits, withdrawals, transfers, and learn how to balance a checkbook using their statement. Having a place for their money to go will teach them to monitor their account and to always spend less than they earn.
Be a Good Example
The best way for a child to learn about money is by your own example. If they see you making the right choices with your money, they will most likely follow in your footsteps. Go shopping together with your child, show them that you don’t always have to buy name brand (and typically more expensive) products. Show them how to hunt for a good deal; it is foolish to buy the first car you test drive or the first suit you try on, shop around and be patient with your purchases. Let your child watch you pay your monthly bills for your mortgage and utilities; most kids do not know what it costs to own a home, or how much water, sewage and trash removal costs. Having them see how much their parents have to pay will become a real eye opener for their future.
As a parent, do not talk kindly about having debt, in fact, let your child know that you strongly despise debt. Yes, as an adult it becomes necessary to have a credit card, but a majority of Americans use their credit card like it was actual cash they have, who only make minimum payments each month instead of paying it off in full. This concept plagues most adults who have credit cards and it is trickling its way down to teenagers and young college students. Once interest gets a hold of your unpaid credit card debt, it can take years to pay off, which is a lesson a majority of Americans have to learn sooner or later. This is why it is your duty as a parent to teach your child to use credit wisely.
The best way to teach a child how to use a credit card wisely is to let them have their own. No, do not give them access to your credit cards, but get them one that is attached to their own account. This credit card should be limited and given to a child with the strict instructions on when and how to use it. 9 Year Mortgage believes that if a child is going to make a mistake with their finances, then it should be before they go out on their own. If your child uses his or her credit card and max’s it out or forgets to pay the monthly bill, they will quickly learn the lesson of late-payment charges and what interest can do to a small $30 purchase. Let them learn their lessons young so that they don’t have to learn the hard way when they are out on their own.
Live Like a College Student
Once your child is all grown up and is ready to go off to college, it would be wise for you to remind them to live like a college student. This means that they are not going to have all the same amenities that they did while living at home. Make it clear that the reason that you have remodeled your home, bought a new car every couple of years, or had the new technology when it was released, was all because you worked hard for it and were able to pay for it. Tell them stories (that relate to finances) about your experiences throughout college or the first few years of marriage. Show them that because of your hard work and diligence that you were able to obtain a good job and are able to afford the luxuries they saw while growing up. Living a comfortable life with the capability of spending money on what you wish is a privilege (of hard work), not a right.
9 Year Mortgage Sums It Up
Teaching your child how to manage money is one of the most important lessons they will learn from you. This is an ongoing lesson that should be taught from the time that they are excited to receive a nickel all the way up until they are receiving their own paychecks and going to college. 9 Year Mortgage is not the only company concerned with teaching kids about money. Checkout www.teachbanzai.com for free lesson plans and other ideas on how to teach financial literacy to your children. Remember to set boundaries and limits on what your child is able to do with the money they receive. Your child should be aware that they can’t always get what they want, when they want it; it requires a lot of hard work. You might find teaching your child about our intricate financial system a little bit frightening, but by doing so, you can ensure your child’s financial future by installing these smart habits now while they are young. Remember what Benjamin Franklin said, “An investment in knowledge always pays the best interest.” 9 Year Mortgage is confident that if parents can start teaching their children now, while they are young, they will develop good spending habits early preparing them to be more financially secure and responsible as adults.
An important part of managing your finances is managing your credit score. Learn the vital steps necessary to keep your credit score sparkling with another 9 Year Mortgage article titled How to Improve Your Credit Score.
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