Seeing that it is child wellness month, I decided to write a quick blog to give advice on how to teach kids about money. I think that this is extremely important, as a lot of people are in financial hardship today because of the example they learned from their parents, or because there is a serious lack of education about money for our teens and young adults.
Children are natural savers. Try this fun experiment. Give your child a marshmallow, chances are they will eat it straight away. Now give the same child a marshmallow, and tell them that they can’t eat it until they are told it is all right… Most kids won’t eat the marshmallow… Partly because their parent said not to, but partly because they are savers by nature. So why do teens and young adults behave differently, and where is the disconnect? It’s our media bombardment. You can’t watch a show or a YouTube video without some form of advertisement to purchase something. There are car commercials with low financing options, and low payments. These take no consideration into the person’s cashflow and ability to pay.
The first rule parents should teach their kids about money is to pay themselves first. When they get paid, automatically have a savings plan that they put money into, and make it difficult for the money to come out of. This type of forced savings will lead to amazing results.
The second things parents should teach their kids is about debt. A credit card is not a magic card for buying what they want. It is a tool that can be used to increase credit scores, allow online shopping and emergency purchase if needed. The problem is that people are finding out the devastation that these cards can cause too late. I will leave you with this calculation:
If you have a credit card balance of $15000, and make the minimum payments, it will take you over 120 years to pay that debt.
So, let’s teach our kids and young adults about money and how it works. We will all be better off for it. If they won’t listen to us, maybe the kids will listen to Ashton Kutcher who said “the best lesson he ever learned was to not put anything on credit that he didn’t have in the bank already”