Teaching Money Management Skills to Children

Many parents have the attitude that household finances are none of their children’s business. I agree with this position to a certain extent. Children don’t need to know all the gritty details about the finances of the household. Kids shouldn’t have to experience the stress that their parents feel when struggling with debt and a lack of money. But when parents completely avoid speaking with their children about this subject they fail to teach them important lessons on how to manage money and use credit.

Consider that your children are going to learn about money management and credit from someone else if you don’t teach them about these subjects. They may learn about debt the hard way when they enter college and are bombarded with credit card applications. Too many college students take out huge amounts of debt believing that when they graduate and start making the “big bucks” they will be able to pay off the debt. After graduaton they face reality. It’s tough to find a job these days and when you do it probably doesn’t pay what you think you are worth. Facing repayment of high-interest credit card debt with a recent grads income can be a daunting experience.

Parents should start teaching their kids how to manage money early. Give your children an allowance. Make them save ten percent of their income so they understand the importance of saving. When they get old enough to understand the concept, teach them about compounding interest. If you can get them to truly understand that concept they will be much less likely to get into trouble with credit card debt. Talk with them about your budget so they understand what it means to live with one. This simple lessons may save your child from a lifetime of financial frustration.