The average American household debt is $5,700 and total outstanding U.S. consumer debt is $3.4 trillion, according to data from the U.S. Census Bureau and the Federal Reserve. I think these numbers could be improved by introducing the concept of money to children early and teaching them to make good financial decisions that can set them up for success later in life.
Talking to your kids about money can instill a sense of ownership in their belongings and how they get them. It will help them understand how much things cost and how long you have to work in order to earn the things you want. Growing up, I had an early understanding of why my parents had to go to work and what their paychecks went towards, such as rent, food etc. This exposure to the concept of money influenced me to be cognizant of its power and respect what good money habits can enable a person to achieve.
I’m not advocating that you stick a calculator in your child’s hand and have them work out your monthly expenses, but exposure to a few basic concepts can help give them foundational context for what they see in a consumer-based world. Simple things, like:
- How to save: Saving birthday or Christmas money for something they really want later on teaches discipline and reinforces the concept of delayed gratification. This is a useful tool to teach them how to save their first paycheck and to understand that they don’t always get what they want instantly.
- How the bills get paid: Show them what causes the water and utility bills to rise and how they get paid – do you use bill pay? Do you send a check in the mail? Show them how the process works and how money goes out.
- How credit card works: Credit is an important tool that should be exposed to children early with the understanding that it is like borrowing money to pay later.
What financial lessons are you teaching your kids? Let me know in the comments below.