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Money Conversations To Have With Your Child

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Money Conversations To Have With Your Child

 When it comes to money and advice on how to teach your kids about money it is hard to sort through the not-so-fun stuff and to get to the "oh, wow that's helpful" stuff. It is unfortunate these days because experts say that it is important to explain to your kids about finances and investing at a young age, but studies have shown that parents are more comfortable discussing bullying, drugs, and smoking than there family finances.

There isn't any way to expect a child at any age to understand the importance of money unless you talk with children about it. So what should you talk about with your children when it comes to money?

Teaching your children at a young age the importance of hard work and earning money for your hard work. It is about raising your children to understand that money doesn't grow on trees. you will know your child is ready to learn what it means to work and have a job when they start to bug you for money and to buy things. When you child is around 3 years old they usually recognizes that you are using money to make purchases. This is the time where you teach your child where money comes from.

The best approach to discuss this is explain to your child about what you do for your career, how you picked it, then ask your child what they would like to be when they are older. You may want to then consider giving your kids extra cash for there allowance, for tasks that they accomplishes related to that career. For example they would like to be a teacher, give them extra money whenever they have complete there homework or got A's. If they would like to be chef then whenever they help with dinner, making the table, dishes, give them a little extra money for those tasks. Same thing if they want to be a veterinarian, put your child in charge of walking, bathing, feeding your dog or other pets.

2. You Need to Budget if You Want to Buy Things

A lot of parents forget to explain to their kids what to do with there money once they have earned it. When you are a child and someone gives you money, and if no one teaches you what to do with that money your child will then grow up thinking all that money is meant to be spent right away. You will then want to sit down with your child and create a budget for what to do with there money. Children as young as three can start receiving and allowance, and with that allowances comes the idea of budgeting and saving. You will want to have 4 clear jars for your kids, this is important for the visual aspect for your kids to see the money in the jars. On allowance day with the jars you will then help your child divide up the money. The rule of thumb is to always donate 10% of what you earn to charity. So have one jar for 10% to charity, 30% for quick cash, 30% for short term savings and 30% for long term savings. So if child earns $10.00 come allowance day you will then put $1.00 into charity, $3.00 into quick cash, $3.00 into Short tem savings and $3.00 into the long term savings.

Also explain to your kids that they do not need to spend there quick cash this week and that if they really want something that costs more money, they should add it to there short term or long term savings jar. This will help them realize that because they have money they don't always need to spend it.

3. Importance in giving back

Explaining to your kids the importance of giving back is always something you should explain to your kids.

Giving back to a charity or organization is a important part of life, the concept may take some kids getting used to. The best way for you kids to understand why it is so important is to involve them in ways they can help make a difference. This could be after buying a new toy, donating there older toys, or buying new clothes to give away there old clothes. You can also have them help out at food banks sorting through clothes and food for the homeless.  You also want to have your child pick the charity they want to donate money to. You can always find a charity that may have interests they like.

4. Financial Responsibility Means Managing Financial Tools Well

Children who start to budget with cash from a allowance often find it hard to make the transition to checking and savings accounts, credit cards, and the idea of investing. This is your job as a parent to teach your children how to use these financial tools.

Once your child has opened a checking or savings account, pay your child in check form, this will allow your child to go into the bank and they can deposit it into there account. You can also then open a online account for your child which you as a family can monitor the money. You can also teach child how online banking works. You can even set up your child's savings account to the 4 different categories like you have done with the jars.
 

5. Everyone Has to Pay Taxes

Explaining to you child about taxes is very important, this will help avoid the freak out later when your child gets there first paycheck from there job and they are like, what happened? who is taking my money?. Explain to your child that the salary they will be getting for there job isn't the same amount that they will be getting in there take home pay.

When you child is around age 10 you will want to consider taking 15% from there allowance and putting it into a family jar, you will need to explain that in real life this money goes towards things like fixing the roads, police offices etc. You will want to have all kids contribute to this jar and is even recommended you put the same amount as your child in this jar. Then at the end of the year you can all use this money towards a family vacation. Even if its just a weekend getaway, or a day trip somewhere.

 

So make sure you sit down with your kids and explain to them the importance of money, make sure you just don't say money doesn't grow on trees. Explain to your kids when they get older that they will need to be paying bills, and other expenses. Most people are ashamed to sit down with there kids and show them how much money they make and where it all goes every month. This is very important key that you need to do with your kids. Show them your budget, where your money goes every month.

 

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