The benefits of getting your own finances under control are
fairly obvious: Steady finances can benefit budgeters financially
through improved credit, more complete savings and greater
financial security.
The benefits of getting your own finances under control are fairly obvious: Steady finances can benefit budgeters financially through improved credit, more complete savings and greater financial security.
They can also give planners peace of mind and a sense of accomplishment, but there’s an often-overlooked reason to get your own books in order.
Having a personal spending plan – and sticking to it – will not only benefit you, it can help your children to make wise financial choices and stay out of debt later in life.
Parents are a child’s most influential teachers when it comes to money management, according to Edward Powell, chief consumer officer for LendingTree.com in an interview with Forbes magazine, so it pays to teach them about their finances early.
Talk the Talk
Kids aren’t born with an innate knowledge of market value and money management, and these topics are seldom discussed in schools, but you have the chance to start a dialogue with your children early.
Once they are old enough to understand numbers, begin by comparison shopping, advised Forbes, helping them to link cost not just with basic goods, but also with value and quality.
Discuss financial information with them as well, advised Jeff Welch, president of Jeff C. Welch & Associates Financial Investments and Financial Planning in Hollister, because children deserve to learn from your mistakes as well as your successes.
“If parents have made mistakes, a lot of times they feel they can’t discuss that with their children because it will show a bad example,” said Welch. “I think the parents can show their kids they’ve made mistakes, show their kids the remorse they feel for those mistakes and what they’re doing to correct them. That’s setting an example because (when it comes to financial mistakes) we’re all guilty.”
Welch encourages parents to talk with their children, pointing out examples of financial successes and failures not only in their own lives, but in the news and in their local community.
He also cautions parents to talk to their children about credit card abuse early and often, encouraging them to be fiscally responsible with cash as well as plastic.
“I used to know a business advertiser, and she said an ad works when you’ve repeated it 28 times,” said Jeff Welch. “I think you can use a parallel when you’re talking to your kids.”
Walk the Walk
Handling your own finances is great, but simply talking to kids about that process isn’t enough, according to Forbes. If you give your kids limits on diet, behavior and entertainment choices, doesn’t it make sense to give them financial boundaries, too?
Setting limits means standing firm when it would be easier to simply hand over another bill from your thinning wallet, instead learning to utter the word “no” reflexively and enduring the ensuing temper tantrums, anger and whining that come with such territory.
An allowance is a good place to start, according to Byron Moore, a Louisiana-based financial planner who answers financial questions for lay people through his Web site www.MooreForYourMoney.com.
“The real value of an allowance is in teaching your children that, while their wants may be infinite, their resources are finite,” wrote Moore. “I regularly deal with the adult results of children who were never taught to tell themselves no. In childhood, they were taught they could always get ‘more’ from Mom or Dad. In adulthood, they replace Mom and Dad with Mastercard and Discover.”
Moore recommended giving children an allowance with strings such as savings attached beginning at around age 10, and increasing the responsibilities that go along with the cash through the pre-teen years to foster the transition from mom and dad money to personal earnings.
Forbes suggested parents not only mandate some form of savings, but help children to divide money between expenditures, like funds set aside for “school,” “clothes,” “entertainment” and “savings” as well as mandating a certain percentage for charitable contribution.
Magazine contributors also suggest starting small stock portfolios in a child’s name to help them in beginning to understand the market economy and recognize the importance of saving for college. They suggest that parents buy children a ledger and a dozen No. 2 pencils for a birthday present.
Helping your child to understand his or her financial limits will aide the child in making tough financial decisions later on when money is tight and myriad credit card offers begin pouring into the mail slot or companies that send representatives to college campuses begin to beckon.
