We work hard to do everything possible to make our kids successful in life. We make them share, play outside, eat vegetables, and get good grades in school, we may even try to teach them about money with an allowance given. Knowing how to raise your kids to be financially independent can be tricky. Most everyone in the world will tell your kids to go to school, get a good job, and work for money. That’s what you have probably been taught. It’s the normal way of thinking about making money. Here are a few ways that we can teach them to get a head start above their peers before they leave our homes.
How to budget themselves
This seems obvious, right? The reality is, typically the more money that people make, the more they seem to spend. It’s easy to spend money. If we teach our kids to set a budget, and stick to it, the extra money can be put away for something bigger, that will appreciate and make them money in the future.
This is where Dave Ramsay’s envelope theory comes in nicely. Have your kids make three different categories, or envelopes, on how they would like to spend their money. Some examples could be savings, fun, shopping, investing, etc. Each time they get paid, they split their money in to those categories, or envelopes, and they stick to that amount. It even works well for adults!
How to use, and not abuse, credit cards
Let’s be honest, how many times have we used a credit card a few times, then we are shocked when we see the statement and realize how much we are suddenly in debt. How can so much money add up so quickly? It is a wise idea to teach kids to only use a credit card in emergencies. Another option could be to use one only for gasoline, and then immediately pay it off. If your kids do not use them at all, it is important to at least teach them about credit cards and how easy it is to lose control.
At a young age, and when finances are minimal, it is a good time to also teach proper use of a debit card. Many people don’t balance check books anymore, there is an app for that. If kids are not going to balance their account, then they should be in constant connection with their bank app, and following their statement. Having conversations with your kids about their bank statement will hold them accountable for their funds, and what is happening with them.
Watch their financial statement
A financial statement is different from a bank statement, it is the whole picture: how much money is coming in, versus how much money is going out. Taking care of the financial statement at a young age will teach them to keep watching it throughout life. It’s like your lifetime report card, that needs to be paid attention to often. Talk with your kids about what kinds of things they want to see on their financial statement. Do they want to see more income coming in than going out? How can that happen? What sorts of ways can they get more money coming in other than a job? It is wise to share our own financial statement with our kids so they can see and learn from our finances.
How to invest in the stock market
I’m not normally one to invest in the stock market… I think it’s too volatile. However, if we sign kids up for a Robin Hood, Stash or an Acorns account, (these are all stock market apps that are easily accessible) they will start to see their money working for them with minimal start-up costs. They will see that stocks can both build and occasionally lose money, while also getting a handle on buying low and selling high.
Start a retirement account as soon as possible for your kids! Retirement accounts can be opened as soon as kids have any sort of earned income. This is where they can really see how compound interest will work for them, and a great way to see their money work. There are apps that kids can follow in many retirement account companies, and kids can follow and watch what happens with their money. Once you open one for them, they will think it’s pretty awesome. It will be the gift they always remember.
What ways to you teach your kids about money? Leave a comment below…
Creating opportunities for financial freedom 