Your Child and Money
Here are a few things you can do to get your son or daughter off to a solid financial start.
Giving your child an allowance and opening a savings account in his or her name are great ways to expose your child to financial responsibility at an early age.
Show your child how to budget.
If you're like many people, you do not like to share your finances with anyone, but sharing this information with your child is a good way to teach him or her about budgeting.
Show your child how much things cost, such as water, phone, and television. Use our Family Expense Worksheet (PDF) to itemize your monthly bills and calculate the cost per year. Maybe your child will understand why you said no that new Xbox game!
Encourage your child to get a job.
Not only will having a job help your child manage time, it will help him or her better understand finances and taxes and will give your wallet a well-deserved break.
Keep track of what your child spends.
Use a log book to show your child where the money goes. And buy a separate log book for your child to use. Teach your child to keep track of money just like you do.
Talk about credit cards.
Debt can last a lifetime, those new shoes won't!
Explain finance charges, credit scores, and all the hidden fees associated with credit cards that can take a lifetime to pay back. Make sure your child understands the difference between a "need" and a "want."
Explain debit cards.
Having a debit card doesn't mean there is any money on it! Make sure your child knows what a "balance" is—and how to find out the balance—before going on a spending spree.
Caution your child that checking the balance at an ATM can cost a fee.
Discuss "good" debt vs. "bad" debt.
Your child should understand that it's rare to go through life without incurring some type of debt. But there is "good" debt, which helps improve your credit history, and "bad" debt, which can ruin your credit history. Here are some examples:
- "Good" debt—Car payments, student loans, mortgage payments
- "Bad" debt—A large credit card balance, general purchases, dining and entertainment expenses
The most important thing is to never get in over your head.
Assist your child with the student aid process.
Look into student aid options together. And help your child complete any aid forms or paperwork. Be honest with your child about the student loan debt he or she will face.
Do this every year your child needs student aid.
Prepare your child for the responsibility of student loans.
Student loans create debt. Talk to your child about how much student loan debt he or she is taking on, as well as how much debt the family is taking on too!
Remind your child that loans must be paid back, even if he or she does not finish school and get a degree or does not find a job by the time the bills arrive. Because of this, your child should borrow only what's needed and give back what's not.