Whether you are a helicopter parent or you have more of a hands off approach, the lessons you teach your children in the early years of their life will have long lasting impacts down the road. While school, sports, relationships, and more are often a priority in what we teach our children, often money is a subject not discussed between parents and their kids. Here are five money lessons every parent should teach their children.
- Credit Cards Are Not A Magic Trick- With the advent of smart applications like Apple Pay and most parents carrying a wallet full of credit cards, less and less do we demonstrate for our children what it is like to pay in cash. When the kids see all of the dinner bills, shopping, etc. being paid with credit, they may not fully grasp how money actually pays for those items. You should try from time to time to do a grocery shopping or a trip to the mall with cash only so your children can understand what it really costs for these items.
- How To Reconcile A Checkbook- I know. I know. You might not even be doing this yourself, so maybe it’s a good time to get caught up on your own finances. When you send your daughter or son off to college and out on their own, don’t let them think that the ATM machine is the check register. Show them how the balance of the checking account should match the month end numbers in their checkbook.
- How To Earn Money- People still mock the idea of having your kids set up a lemonade stand, but it is still one of the best ways to show your children the challenges and opportunities of starting a business. Whether your kids get a baby sitting job, rake your neighbors leaves, or work at a local restaurant, getting them to wrap their head around earning income, paying taxes, and what really goes in their bank account is an important money lesson to learn at a young age.
- The Power Of Compounding- Since almost every young adult has a smartphone, getting them started early with owning at least one stock and tracking how that stock does every year can help demonstrate the power of compounding interest. Bank accounts don’t pay very much today or this could be an easier lesson to learn, but getting them excited about saving versus spending is a key lesson to learn growing up.
- Why It Is Good To Give- How many kids give away part of the cash birthday gift they get from their Aunt or Uncle? Nobody. Help them find a cause early in their lives that they get excited about and why it is a good idea (both financially and morally) to give money away if you are fortunate enough to be able to help others.
Use these five money lessons to help your children to grow up to be smarter financial adults.
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Ted Jenkin is a frequent guest columnist for the Wall Street Journal and Headline News Weekend Express. He is the co-CEO of oXYGen Financial. You can follow him on LinkedIn @ www.linkedin.com/in/theceoadvisor or on Twitter @tedjenkin.