Empower Your Child to Overcome Future Money Obstacles
5 Tips on Budget and Personal Finance for Parents
Most of us have been there. You have a general knowledge of money, how to budget and how to plan. But when it comes to the big stuff, having enough money set aside if you need a new roof on the house or if your company has layoffs, you’ve had to learn the hard way to take steps beyond just getting by.
You want better for your children. Teaching your kids now the lessons you wish you’d learned earlier may help them avoid financial struggles as adults.
It’s never too early to get started. We recommend beginning the following steps when your child is 11 or 12, before they get their first job and start developing the money habits that will carry them through life.
- Show your child the impact of debt.
Pick an example from your own life. Whether it’s credit cards, student loans or a car loan, explain to your child how much impact committing to debt has. Emphasize how important it is to evaluate the decision, with an example like:
I took out a five-year car loan at $300 per month. That’s $300 less I have every month for five years for food, fun, saving for emergencies, and other things. You have to make sure you can afford that before you commit to it.
- Share the reality of living expenses.
Most kids understand “we are fine on money” or “it’s a little tight right now.” And most parents want to shelter their kids from the harsh realities of adulthood. But there’s no harm is helping them understand how much things cost.
So the next time you get upset that your son forgot to turn the lights off, explain to him how much it costs each month to keep them on. The next time your daughter throws a few extra things in the grocery basket, show her how you budget for food, how that altered your plan and why this kind of planning makes a difference. If they are picking out a gift for a friend, show them how $20 goes a lot further if they choose items that are on sale.
- Demonstrate the power of earning interest.
If your child doesn’t have savings account, it’s never too early open one. If you encourage them to put a percentage of every dollar they receive in savings, whether it’s 10% or 50%, you can show them how that money grows over time just by leaving it alone. You can help them become comfortable with paying themselves first, instilling the value that every dollar they earn from allowance or babysitting, or receive for birthdays or holidays, doesn’t have to be spent right away.
- Calculate the cost of dreams.
Many people assume that if a career requires education, it will pay enough to meet their needs. But that doesn’t take into account student debt, availability of jobs or the drastic differences in cost of living in different locations. These are all things to discuss as your child gets closer to high school graduation.
The thing you can’t emphasize early enough is this:
The less debt you start out with as an adult, the better you’ll be able to afford the life you want.
This doesn’t mean your child has to give up on their dreams. It just means they need to start thinking about how to pay for them.
One thing you can do is start a 529 Savings Account. It can be used for higher education, and that includes trade school! Some scholarships can also be used for trade school. The WoodmenLife Focus Forward Scholarship® is one of these, plus it takes more than GPA into consideration.
Teaching your children how much smoother life will be if school is paid for can help when you face situations of encouraging them to work harder in school or do more community service.
- Teach the importance of a backup plan.
Life almost never goes the way we plan, so teaching our kids resilience is a must. Opportunities for demonstrating this are all around you. If you have plans for an outdoor event and it rains, what can you do instead? If school gets harder than expected, what can we do to help bring those grades up? Teaching kids how to have backup plan in place can help with future financial struggles.
Speaking of backup plans, what is yours? How will your family pay for things, if the worst of all things, you should die? Having life insurance is crucial to securing your financial situation. If you choose whole life insurance, it also builds cash value. So for example, if you purchase whole life insurance for your kids now, as an adult they may be able to use cash value to buy a home or pay for school.
These tips lay the groundwork, and when you think about all the money lessons you’ve learned in your life, you have so much to teach your kids. Ultimately, they will make their own decisions, but you will have helped them lay the groundwork for a stable financial future.
Even more important is to be a role model with these behaviors. Let your kids see you living them out. If you need help evaluating your financial needs, WoodmenLife can help. Click here to find your local Representative.