For those of you that like to borrow money to the point that it comes out of your eyeballs, you might not want to listen to this advice. But, for those of you that are fed up with owing money to everyone for everything, and you don’t want to put your kids through the same agony that you’ve gone through, this is the article for you. The problem is that our nation is indoctrinated to think that borrowing money for everything is a way of life. Swiping the credit card has been woven into the fabric of our society, and now children are learning how to borrow at a very young age. So, the cycle will continue unless parents start teaching their children something different. Don’t count on the schools to do this for you. Most of them don’t even have a personal finance cirriculum, and if they do, it’s probably sponsored by a credit card company. Here are some tips for how to teach your children not to borrow money.
Teach Older Children To Save With The Pay for Performance Method
Teaching a child the value of saving money on a recurring basis is a lesson they will thank you for the rest of their life. When they ask for a new toy or to go on a certain class trip or trip with a friend, that is the perfect opportunity to teach them to save. Write down a savings plan on paper or on the computer with them so they can have a goal for how much they need to save each week or each month to reach their goal. Then, brainstorm for ideas about how to earn that money. This is best for middle school and high school aged children. Put in writing which chores they can do around the house that will earn them extra money, and define which chores they must do just for being a resident of the house. For instance, they shouldn’t get money just for cleaning their room. But, you can pay them for mowing the lawn, helping you paint a room, cleaning out the gutters, organizing the garage, or any other out-of-the-ordinary chore around the house.
Make Saving Fun With Young Children
You need to capture the minds of young children. Saving money does not sound fun during that initial conversation with your young child. Make a project out of it by picking a piggy bank or jar to decorate with him or her. Then, explain to them that you will give them a 100% match for every dollar they save. Making their savings bank look cool and giving them an incentive to save can help your 7 or 8 year old want to save their money.
Don’t give a teenager a credit card.
Many people give their teen daughter or son a credit card for emergencies, especially when they first start driving. Please don’t do this. They will begin to see how easy it is to swipe that card, and they never get to see the bill. If you want them to have something for emergencies, get a prepaid debit card that you can load money onto and have them carry that. Besides, if you really want them to learn sound financial principles, explain to them the importance of having an emergency fund.
Give them a lesson on interest.
There is interest that works highly in your favor and interest that works highly AGAINST your favor. Show your children the difference between savings interest and debt interest. I guarantee that if they grab this at a young age, they’ll never want to borrow a dime in their life!
There are many other methods, but these are just a few. The best thing that you can do for a young person is teach them about money and how to live a life debt free. If your child gets out of college without any debt, he or she will start their professional life with a tremendous advantage over the young people who come out of college with $50,000 in debt from student loans and credit cards. Do them a favor and teach them not to borrow money.