3 Mistakes you are going to commit if you don’t teach personal finance to your kid. Prepare your kids for life and teach them about personal finances, and guide them to become successful at handling their own money.
Not a single person in the world is born with an instinct for money. Children are no exception to it. You have to teach your kid about money and other personal finances by citing before him/her examples and your personal experiences. The earlier you will begin to teach your kid about money, the savvier your kid will turn in financial matters.
Then by the age of 18, when you have to let your kid attend college or university, your kid will make the first step towards an independent life with a sound knowledge of money.
The 3 mistakes you are committing if you do not take the initiative to teach your kid about personal finance
So, what will happen if you do not give adequate time to the kid and encourage him/her to learn about personal finance?The consequences of financial illiteracy will never be good for your kid.
People will try to mislead your kid and he/she will become easy prey to fraudulent practices
Helping the kids to learn about personal finance is not included in the school curriculum yet. So, the next option for the kid to learn about personal finance is to learn it at home. If you will not take the initiative to teach your kid about personal finance, in no time he/she will become easy prey to fraudulent practices.
Your kid will be prone to lead a flashy and showy life without thinking about future
According to The Nielsen Survey, almost one in three American adults with income between $50,000 to $100,000 live a paycheck-to-paycheck life. They are forced to take out loans to continue their daily living. The majority of persons who are living a paycheck-to-paycheck life are having lack knowledge of finance. They think less about the future and get easily attracted to live a lavish life. That is why if you teach your kids about personal finance from an early age, their future will be secured and a happier one.
Your kid will turn into a clueless person in the fast-changing cashless world
In the era of online banking and credit cards, tangible things like notes or coins have become almost obsolete. According to the FDIC (The Federal Deposit Insurance Corporation), only 30% of all transactions happen through cash.
For Generation Z or Gen Z who are currently in the age group of 8 to 13 years, living in a cashless world is going to be their normal life. So, if you do not prepare your kid today about the latest techniques on personal finance, someday later he/she will turn into a clueless person in the cashless world.This is the reason you have to start teaching your kid about money at an early age.
From where you should start teaching your little one about personal finance?
Experts say that kids become curious about money around age 6 when they watch their elders talking about it. So around this time, you can slowly make him/her learn about money and other aspects of personal finance.
Start with the household budget first
Some parents shy away from discussing money matters with their kids. They think kids should not be indulged in high thinking at such a young age. Indeed, it is correct but only partially correct. You can guide them to learn about the family budget in a simple way.
Give them the responsibility of simple calculation of how much money is being spent in a week, or in a month. Let them check how much money is required for which particular sector of the household. Slowly, they will start calculating their mind about earnings, spending, and savings.
If your kid learns about the household budget well then he/she has succeeded to climb the first stair of personal finance.
Guide your kid on how to use the credit card without falling into the debt trap and fraudulent cases
It is the marketing strategy of credit card companies to target teenagers with lucrative offers on credit cards. Teach your kid from a young age how to use credit cards cautiously without falling into the debt trap.
Not only that, but you can also help him/her to learn about credit score, credit history, credit report, etc. The faster he/she will be able to learn about the good and bad aspects of a credit card, the quicker the little one will be able to protect himself/herself from credit card fraud cases.
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Give your kid a beginner’s lesson on investment
This may not be an ideal age for learning about investment techniques but you can at least acquaint your kid with what investment is all about. If you are thinking about how you can grow a knack for him/her investment as he/she is so small now, apply some simple formulas.
Your kid loves to watch cartoons on TV. Just sit with him on the couch and run any business channel. Or you can run any YouTube video on investment in the mobile and give him/her a piece of the earphone.
Your kid will initially complain that some boring stuff is running on the TV or the internet. But when he/she becomes habituated with it, these investment things will not make them bored that much. Of curiosity, your kid will start asking questions about what is running on the tv or the internet. Just answer him/her in simple words. It will gradually catch the knack of your kid.
You can playfully teach him/her about retirement savings like the IRA or 401(k)
At this young age, you cannot make him/her learn about the complex procedures of the IRA. But you can at least try to make your kid playfully learn about the IRA. For example, this week you can tell him about the traditional IRA in playful language. In the next week, you can tell your kid about Roth IRA in a story-telling manner.
The same thing you can tell him/her about 401(k). How your office is helping to grow your retirement savings through 401(k) you can narrate in a very simple way before your kid.If you can grow his/her interest in these matters, in the future when your child will become mature it will be easier for you to make him/her learn about retirement savings.
Make him aware of the negative aspects of several types of debts
The CNBC report has clearly stated that Gen X or Generation X is the most careless generation about debt. In the trajectory of unsecured debt like credit card debt or payday debt, Gen X is drowned under $36,000 personal debt.
So, there will be no harm if you make your kid aware of the high-interest charges on debts. You can also help him/her to learn about the payday loan if a person once falls into the payday debt cycle, why is it nearly impossible for him/her to pay it back and how to get out of the payday loan trap, etc.
You may make your kid aware of the relationship between creditor and debtor as well.
What else?
Bankrate says almost 30% of Americans live their life without having any regular savings for emergency purposes. That is why National Teach Children to Save day is celebrated every year on the 24th of April. What you have to do is to help your kid learn about money and other personal finances as well as motivate him/her about taking interest in personal financial matters.
Author Bio: Catherine Burke is a financial writer for online payday loan consolidation. She provides information on successful cash loans and payday loan consolidation to help people get over a difficult patch. She lives in Kansas and has earned a frame in the matter of payday loans.
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