The Importance of Teaching Personal Finance Early

Posted on 17. Apr, 2012 by in Wealth Essentials

Teaching personal finance

This is a guest post by Sam Peters

Many people in the world today have financial problems and much of it stems from not learning how to handle money early enough in life. Those who are broke now, probably learned what they know about money from the way their parents handled money. This creates a never-ending cycle of struggling to get by financially. If you want your kids to live a comfortable lifestyle financially, you need to teach them early on how to handle money.

Strong Financial Foundation

People do not inherently understand how to handle money. This is a skill that must be taught and learned. As a parent, it’s your job to teach your kids about financial matters. You can’t simply leave it up to the schools or to someone else. While most kids learn plenty of economic theory in school, they don’t actually learn how to handle money on a personal level. Most people go through the school systems and end up not knowing how to make money or keep it. It’s up to you to take the responsibility for your children and teach them how to deal with money.

Letting Them Handle Money

When it comes to teaching your kids about money, is typically a good idea to let them learn firsthand. This means that you have to allow them to handle some money at some point. Instead of handing them a certain amount of cash, you may want to consider using a tool such as a Green Dot prepaid card.

With this type of card, you can load a certain amount of cash on to a card that they can use just like a credit or debit card. The nice thing about this type of card is that once the cash has been spent, you cannot rack up any more charges on the card. This means that you don’t have to worry about any debt issues. Using this type of card shows your children that money is limited and how they can only spend a certain amount before it runs out.

Considerations

Once children see how money works, you need to teach them about saving some of what they earn. If they have some kind of job or earn money by doing chores around the house, you can show them the power of saving a percentage of their own income. After a while, they will have some cash saved up and have the habit of saving developed for the future.

Kids need to learn the importance of money, as well as how to handle it, at a young age.  Learning responsible money management skills at a young age will only help your kids continue positive spending and saving practices in the future which will help them avoid becoming a debt ridden statistic.

Image by o5com

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12 Responses to “The Importance of Teaching Personal Finance Early”

  1. krantcents

    18. Apr, 2012

    I agree, I taught my children to save their money. I involved them in everything I did. The most important thing I did though was set a good example. Children watch how adults deal with things, problems, people etc.

    Reply to this comment
  2. Money Cactus

    18. Apr, 2012

    I think that it is so important to set good examples and ensure your kids have an understanding that money doesn’t just appear, it has to be earned and used wisely.

    Reply to this comment
  3. John

    20. Apr, 2012

    When my wife and I have children, I’ll be so excited to teach them how to properly handle money. Small steps, short lessons, and situational lessons can really help children get a grasp on what it means to handle finances.

    Thanks for your article!

    Reply to this comment
  4. Simple Finance

    20. Apr, 2012

    My daughter’s only three and a half, but she can already identify all the different coins by name, and knows which one is worth the least and which is worth the most. You are so right – schools don’t really teach personal finance; home ec’s a thing of the past, and that’s where I learned it!

    Reply to this comment
  5. It is important; particularly in light of us all keeping our children out of most life situation (I see everyday university students who can’t even cross the road, what about ironing a shirt). We have been doing two things: discussing money matters freely infront of our 11 years old son and playing Cashflow.

    Reply to this comment
  6. Jai Catalano

    24. Apr, 2012

    The earlier the better. My step father is teaching my 2 year old to buy and receive the change. It’s so cool to see the value of what he is doing happen so young.

    Reply to this comment
  7. Yes, it is the responsibility of parents to teach their children how to manage and value money and finances. The problem is that so many parents are that bad in it themselves. How can you expect their children to do better? Maybe there is a role here for the schools, as a kind of backup plan in case the parents fail in their duty.

    Reply to this comment
  8. mbhunter

    30. Apr, 2012

    Starting young is a great idea. Our seven-year-old has had an allowance for over a year, and we’re teaching her about tithing, saving, and spending.

    Reply to this comment
  9. It is difficult for children to understand the value of money. I great way to illustrate this is to share with your child how many hours of work it would take to buy the item. Puts a whole new perspective on the value we place on money!

    Reply to this comment
  10. I always recommend giving the allowance in coins. Kids love to look at them and touch them, and they can put them into their banks. Show her that five pennies equal a nickel, two nickels equal a dime, and so on. They start to see how it works.

    Reply to this comment
  11. Debt Free Teen

    29. Jun, 2012

    Couldn’t agree more! I received both an Allowance and a Clothing Allowance for the chores around the house that I did. I had to budget year-round to ensure I always had enough money for clothes and other expenses.

    This was by far one of the most beneficial ways for me to learn about money at a young age.

    Reply to this comment

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