If you're a parent, it's likely that you know the feeling of wanting the best for your child(ren). And what parent doesn't want his/her child to have a better life than (or at least as good as) his/her own?
Today we'll cover Part 1 of this piece from Money titled "How to Make Sure Your Kids Will Live Better than You", an article that offers several ways to make this wish a reality. Here's Money's advice:
Strategy No. 1: Explain the new money rules
Unlike you and your parents before you, kids today are growing up in a world in which technology has made money largely invisible. Want to buy something? Hand a piece of plastic to a cashier and the goods are yours. Need cash? Stick a card into a bank machine and out pops the dough that probably landed in your account through direct deposit of your paycheck.
Since actual dollars change hands far less often these days, children don't get to learn by observation how financial transactions work, and parents miss out on everyday opportunities to teach the basics of managing money.
So it's up to Mom and Dad to explain what kids can't see with their own eyes, starting as soon as your son throws his first candy-demanding tantrum at the grocery store or your daughter asks for a magic money card like yours.
"The earlier you begin talking to your children about money, the better chance you'll have to instill the values you think are important," says Philip Heckman, director of youth programs for the Credit Union National Association.
Instead of delivering formal lectures, casually drop lessons into your daily financial routines. When your preschooler accompanies you to the ATM, let him know that you're taking out money you earned at work and put in the bank for safekeeping. Verbalize your purchase considerations at the store, comparing prices and quality out loud.
If you whip out the plastic to pay, explain that either the amount is being taken out of your bank account directly (if you are paying with a debit card) or you will get a bill in the mail that you must pay later (if it's a credit card). Add layers of detail and sophistication as your child gets older, explaining, for example, the concept of interest and late fees.
Look for ways to directly involve your child in financial activities, making a game of it if possible.
This has been an on-going challenge for my wife and me. It's difficult to explain to a young child how a credit card works (and that we have to pay the credit card company for items we've purchased). But we've stuck to it and as our kids have aged, they've started to learn bits here and there. They still don't have it all (we turned on the video camera the other night for their hilarious explanation of how we were able to buy food), but they're coming along.
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