How to teach your kids about personal finance

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Teaching your kids about personal finance means providing them with essential life skills to help them make informed decisions. Here are some tips on how to start teaching your kids about money:

Start early

It’s never too early to start teaching your kids about personal finance. Even young children can learn the basics of saving and spending responsibly. You can introduce these concepts during everyday activities like shopping trips or outings to a restaurant. Show them how to make smart decisions with their money by comparing prices and looking for discounts and deals.

Show Them Your Habits

Show your kids how you manage your finances. This can include showing them what a budget looks like, how you track expenses, and how you pay bills. Explain the importance of spending responsibly by setting an example they can follow.

Model good behavior

Kids learn by example, so it can help to model good financial habits for them. Show your kids how you save for the things that matter, like vacations or a new car. Talk about why it’s important to pay bills on time and why you make the financial choices you do.

Explain financial concepts little by little

While you can teach things like spending habits by example, many financial concepts require explanations. Introduce your kids to financial concepts. Teach them the difference between wants and needs—and why both have a place in your budget—and explain different types of investments, such as stocks and bonds.

As they get older, the concepts can become more complex—you might teach them about loan interest, annuities, home equity, retirement accounts like 401(k)s, and even permanent life insurance policies like whole life insurance or universal life insurance. Encourage them to ask questions and research topics that interest them. There’s a lot of misinformation out there, so show them what reliable financial resources look like.

Help them open a bank account

Opening a bank account can be a great, practical way to show kids the basics of personal finance. It can help them understand concepts like interest, deposits, and withdrawals. You can show them how to set up a direct deposit when they get their first job.

Discuss paying for college

College will likely be the first big expense your kids take on—or help take on—and discussing how to save for and finance tuition costs can help them make the right decisions when the time comes.

Discuss how they can save their own money from a part-time job. Walk them through ways you’ve saved for this expense, like 529 plans and Coverdell Education Savings Accounts. Talk about applying for financial aid, getting scholarships, and taking out loans. Discuss what each of these means and, in the case of loans, how they can impact their financial future.

Talk to them about credit cards

As your kids approach college age, they might consider getting a credit card, or you might consider adding them as an authorized user on one of yours. A credit card will likely be one of the first financial products they have access to as young adults, so it’s especially important they understand the ins and outs of credit card use. Discuss which cards they’re likely to get approved for. Go over the benefits of using a credit card, such as building credit and getting cash back. Explain what happens when you don’t pay off your balance in full and how interest rates work.

Source: iQuanti