Back to School, Financial Edition: A wealth of knowledge. For their knowledge of wealth.
Back to school shopping is about to begin. For kids it means fresh new clothes and shoes but for parents, it means spending a lot of money. As children are preparing to head back to school, there's one lesson that parents need to also pass on to their young ones - the value of money. Early and honest conversations can have a big impact on kids' futures. With the hopes of having financial conversations, perhaps they'll have less student loan debt, be less inclined to carry balances on credit cards, and look for opportunities to save and invest their money more strategically. As a parent, you want to give your kids the tools and know-how to be successful in life. Teaching them how to manage their money is vital, and you can never start too early. Stay with me as we go thru some financial skills for kids and young adults.
Start Small – Start kids with an allowance to help them practice budgeting and making smart money decisions.
Needs vs Wants - A need is something a person requires to live or thrive. A want is something enjoyable but not necessary. Sometimes, children can have a hard time distinguishing between these categories. Encouraging children to think about these two categories can help them approach money mindfully.
READ books about Financial Literacy - Stories can help children apply all kinds of helpful skills to their lives, including financial literacy. The main factor in creating wealth is starting young.
Practice Budgeting Together - Teaching kids how to save money can help them avoid habits that lead to debt problems later on. Encourage your child to save up their money for something they will really enjoy instead of buying small things whenever the mood strikes.
Parents always hope for a better life for their kids, and it starts with guidance through grade school to helping them spread their wings right after high school. Graduating high school brings about a new chapter and a new level of independence that we hope we have prepared them for. But along with newfound independence comes new experiences and unknown responsibilities. One of the most important talks that should be had before a young adult venture out on their own is, how to manage money and especially how to handle credit. An in-depth conversation will prepare them for the eventual struggles that we all experience and help them set the stage for a secure financial future.
1. Establish smart goals and stick to a budget.
Just as you set goals for your academic college experience, apply the same principles to your finances — in college and beyond. Start with a monthly budget and graduate to a semester, year or duration-of-your-degree budget. This will help you understand the full cost of your education and how much financial aid is available to offset the cost. Practice tracking expenses to make sure you have enough to cover your basic living expenses. Find a method that works for you to manage your money — whether it’s a cell phone app, an online spreadsheet, a ready-to-use software program or simple pen and paper.
2. Open saving and checking accounts and practice saving.
Every student should have both a savings and a checking account to learn financial responsibility and accountability. Communicate with your parents and set expectations such as planning ahead for bills and allowing enough time for parents to deposit money into your account. In return, challenge yourself to live within your means. Today, banking is mostly online and financial transactions show up immediately in account records. But you still need to keep track of your account balances to make sure you don’t overdraw and spend money you don’t have. Saving is a learned behavior! It’s healthy to treat yourself every now and then — just keep your focus on the real purpose of being in college.
3. Build your credit history safely and wisely.
College is a chance to start building a good credit history. Getting a credit card is a serious responsibility. You can use credit cards to your advantage to build your credit history and establish a good financial reputation for life. Credit cards should offer a reasonable interest rate, good rewards and no annual fees. One Visa and/or one MasterCard should be sufficient to start establishing credit. Never charge more than you can pay in full and on time each billing cycle!
4. Get a part-time job or take an additional class.
Find part-time, occasional or seasonal work to contribute toward your educational and living expenses — as long as that work doesn’t negatively affect your academic success. Many studies suggest that working part time in college teaches students time budgeting and money management skills and instills a sense of self-accomplishment, in addition to providing work experience.
Financial literacy is an important topic that traditionally has not been taught in schools much, and many adults wish they understood more about how money, particularly their money, works.
Cicely Jones, CEO & Accountant
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