Never Too Early for Money Management Skills

How many adults do you know who lack money management skills? Credit card debt is at an all-time high in the US, as well as the number of foreclosures and other money-related woes. The fact is that many people are unable to balance a checkbook or understand a credit card statement (not to mention a ten-page mobile phone bill), so how can they be expected to adequately manage their personal finances?

The time to start teaching money management skills is now, regardless of how old your children are. This does not mean punching out paper "money" from the back of an arithmetic workbook, and pretending to spend it (although this might be fun for the very young if you set up a "store" for them to run and "shop" in). Real money management lessons come from real-life situations. This means children must have access to ample money-earning opportunities as soon as they understand that money has value. Working to earn money is a great way to instill that money has value, and because of the work invested, children want to handle their more money carefully than when it is simply given to them. This is not to say an allowance is bad. We always gave our children allowances, but they were small in comparison to those of their peers, who, by the way, spent their allowances as quickly as they received them.

Here are some great ways to teach your children money management skills:

1. Don't buy your kids whatever they want to avoid an insatiable desire for every great new thing that comes along.

2. Provide money-earning opportunities around the house so that kids can earn the things they want on their own. (Often, once they've earned the money, they'll change their minds about the purchase on their own.)

3. Give them short-term, relatively easy job opportunities for quick cash, such as sweeping out the garage, as well as more time-consuming, difficult jobs that are worth more when completed, such as washing all of the windows, inside and out.

4. Encourage them to be creative and find ways to earn money on their own, both at home and around the neighborhood.

5. Open a savings account and encourage them to save a portion of all of their earnings. Most children enjoy knowing they have a bank account and will want deposit even more than you might expect.

6. Teach them to give 10 % in tithes and offerings to your church, or donate 10% to a worthy cause. Hopefully this will become a lifelong habit.

7. Talk about money matters whenever possible. Explain how credit cards work, and why one must be very careful when using credit. Explain the difference between a debit and a credit card. Older children need to understand interest and how it affects credit card payments and balances as well as how it earns money on savings and other kinds of bank accounts. These conversations can take place at any time during the natural flow of daily life as your children observe your financial dealings. Encourage them to ask questions, and help them to set up a budget.

8. Teach your teens about checking accounts and how to write a check and manage a checkbook. Let them open a checking account as soon as you think they are ready. Most banks will open a "student checking account" for kids at age 16.

9. Don't be afraid to include your children in money related conversations. Money problems affect the whole family, and children should have the opportunity to help out in some way to lighten the burden and to actively learn better money mangement skills at the same time.

10. Teach them to be good consumers. Involve them in comparison shopping whenever possible, whether on the Internet, in catalogs, newspaper ads, or at the mall. If you clip and use coupons, teach them to do the same. Encourage your children to spend money carefully, and to do without if an item is priced too high for their budget.

All of these things can help your children to learn to manage money that will greatly benefit them as college students and adults. Many people have never been taught to manage money; resulting in overspending, credit card mismanagement, and too many bills. Often, we turn to debt consolidation, which is not always the ideal solution it is touted to be. If you have ever considered going this route, by all means, please learn all you can about it first. Although advertised as "non-profit," these companies are working for your crediters, not for you, and you will often find that a portion of your payments goes to "servicing fees." It is essential that you know upfront exactly what you will be paying and where it will go. Home equity loans are usually the better choice, but because your home is offered as collateral, you must, again, be very careful. There is no reason to shield our children from these financial facts of life, by the way. Knowledge is key. You may be instrumental in keeping a child out of bankruptcy someday!

Are your children aware of the costs of driving? Children often are not. As a child reaches driving age, she needs to understand that a car is expensive. Not only should your child help to pay the cost of a car, she should pay insurance costs as well as for gasoline and maintanance costs. Car insurance comparison shopping alone is quite a responsibility for a teen, although in recent years it has become a bit easier with companies such as CarInsurance.com, where you can complete the process and have your proof of insurance within 15 minutes! However, with the cost of fuel being what it is, and all the hidden costs of driving all laid out, kids often decide to postpone driving. For some, it's just not worth the expense and responsibility! (None of my children drove before the age of 18!)

Teaching money management skills is just as vital as teaching reading and writing skills, so please, do not neglect it!