It’s difficult enough to stay on top of your own finances – to constantly pay bills, mortgages, car payments, insurance payments, groceries, health care, and other personal expenses all while trying to save and invest along the way. Sometimes you can adopt a tunnel-vision mentality, plowing through the list of tasks and duties while taking care of your family.
Your children are taking in your actions and learning from example. How you manage your finances can affect how they manage theirs later in life. So how can you teach your kids about managing finances as they grow up?
Here are just a few examples of things you can do for yourself that also provides a path for your children to secure their own financial independence:
Get Organized
One of the immediate things you can do for yourself is to get organized. Make sure your budget accurately reflects your income and expenses. Set up automatic payments online if you can, and if not, then create a calendar to remind yourself of payment due dates. Showing your child that you are in control and organized will give them confidence in you and in the process.
Start Investing
The moment you have access to opening a 401K via your employer or otherwise, take advantage of it and do it! Try to get in the habit of squirreling away some income every month. My grandmother always gave me the advice to “pay yourself first” before you divvy up your check to mortgage or rent, utilities, and other expenses. Speak with a financial advisor and try to diversify. Look for lower-risk investments. It’s okay to let your children know that it’s important to save money for the future. Even at an early age, they can put their own money away in a piggy bank and they should have their own bank account as they get older. Young children are more conservative spenders than teenagers, so it’s a good idea to get good spending habits solidified early on.
Get Insurance
Anyone with children should also have a life insurance policy. If something were to happen to you, insurance is one of the most reliable ways to ensure that your children are financial protected after you are gone. A Life Insurance policy can be utilized to cover mortgage or rent for the family home, pay for tuition and other college expenses, or even start or maintain a small business.
There are some great free tools available, including Genworth Financial’s budget and life insurance calculators, to assist you in budgeting finances and making Life Insurance affordable without substantially tightening your belt. It may even be a good idea to let your kids play around with the calculators to determine some of their own ways they might be able to save money. It’s never too soon to teach them the value of saving.
There are many other opportunities to impart financial wisdom to your kids that also help benefit your own bottom line. For instance, give your children a first-hand demonstration of the importance of paying cash for large purchases like cars, vacations, or computers or electronics rather than financing them. Not only with provide tangible personal experience, it will also be a great benefit for your credit score.
And speaking of purchases like cars and other vehicles, it’s important to teach your older children the value of using the web and other tools at their disposal to find the best price for the items they purchase, in tandem with teaching them the fine art of negotiation. As any astute businessman or executive can tell you, strong negotiation skills can go well beyond saving a few dollars over a lifetime.
Your children, even the youngest ones, may surprise you with just how well they well understand the concept and the value of keeping good financial habits. It behooves you and them to start early and continually encourage them to grow their own pot as they mature. There are a number of fantastic resources available to guide you and your children every step of the way, including sites like MoneyAsYouGrow.org, that offer suggestions on how to approach financial decisions through every stage of a life.
How do you teach your kids about managing finances? Got more tips?
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