We’ve talked about how to recover your bad credit before. It’s an inspiring story, but it’s also far too common, particularly for young people. Even if it doesn’t involve identity theft, ING’s study found that 83% of teens don’t know how to manage money. According to the National Financial Educators Council’s annual survey, 75% of young adults are unprepared and fearful of handling their finances and earning money. THIS is a problem we can fix. Why don’t we?
Why Kids Need Help Understanding Money
You’ve probably heard the debates about requiring financial literacy courses before graduating from high school. That sounds like a great idea. Of course, such courses would require funding, and thus far, as of the update on 11/23/2021, only 10 states offer a financial literacy course to high school students. The other brutal reality is that millions of Americans struggle with money regularly. Some 78% of people live paycheck to paycheck, and 73% are in debt.
Help Your Kids Understand Financial Literacy
If someone had told me that I needed to learn about financial literacy when I was 18, I probably would have thought they were insane. What’s there to really know (I’d have thought)? There’s money. You either have it or you don’t. I worked after school in high school, but I never saved much. I used the money to eat, buy clothes for school, and support my addiction to books.
Financial literacy is more than just knowing the value of money; it’s about budgeting, borrowing, investing, understanding taxation, and managing personal finances. I heard the rumors about those distant cousins who went off to college, signed up for credit cards, and charged them up to the hilt. Then, when I went to college, there were kids who brazenly bragged about how they blew their loan check, financial aid dispersal, and every other penny they could scrounge up on partying or that new car. It wasn’t long before at least a few of those kids were sleeping in their cars or couch-surfing.
Help Your Kids Understand Why Financial Literacy Is Important
There are several reasons why financial literacy in young people is important to me. For one, I was woefully ignorant about how to manage my finances when I graduated from high school. I did learn how to write a check, but over the years, that life skill doesn’t come in handy very often these days. I think it’s fair to say that my relationship with money and my financial literacy have evolved over the years. I wish I’d known then (back when I was 18) what I know now.
The other reason financial literacy is so important to me is that I don’t want my kids to face the same struggles I did. I want them to understand what money is, what it can do for them, and what its limits are. So, in a sharing vein, here are a few money tips you can teach your kids. These are lessons I hope will help just a little bit in the years to come.
Help Your Kids Understand The Difference Between Want And Need
As an adult, it’s often not hard to tell the difference between want and need. In the need category, you’ll find rent (a place to live), gas and insurance money (to get to work and college), and those other few essentials like a supply of Ramen noodles. For a broke college student like me, everything else was categorized as a want. Everything seemed so much simpler.
One of the things I’ve tried to teach my kids is the difference between want and need. The basics are still the same. Each of us needs a place to live, a way to get around, and food. They also need clothes, a laptop for school, and a few other necessities to function at school and prepare themselves for their futures.
Help Your Kids Understand What Credit Is
Some adults still haven’t figured this out, but credit cards are not magical tokens that will buy every high-tech gadget, toy, or experience without cost or obligation. There’s that moment when your child says they want a toy, game, or other object, and you tell them, “No, it’s too expensive. And, you don’t need it.” They say, “But, you’ve got your credit card.”
That’s the perfect opportunity to talk about how credit cards work. It’s not free money. You’re just borrowing it for a little while. You must pay it back (with interest), and you should never overextend yourself. If you’re late with your payment, don’t pay it back, or you overextend yourself, you face penalties just like you would if you borrowed a book from a library.
Help Your Kids Understand What Things Cost
Kids start with play money in elementary school, but the best way to teach them about the cost of things is to allow them to work to earn an allowance. Then, they decide how they want to spend their money. Depending on what they receive from grandparents, friends, and relatives for holidays, birthdays, and milestone events, they can also add that money or gift cards to their earnings.
We discuss what they want to buy with their money. Part of the discussion is the cost, what’s included in the cost, whether they will have to save up to buy what they really want, or whether they will buy something else instead. We look at the item online and, if applicable, in-store. We also use the Teen Amazon Account, which allows relatives to gift an Amazon card, which can then be redeemed for item(s) on Amazon, with approval.
Help Your Kids Understand The BEST Deal
As part of our discussions about money, what they want to buy, and whether they will need to earn more, we also talk about sales, great deals, and reviews. I ask them, “Did you look at the reviews?” What do they say? What are the ratings? Are there better options with better reviews? Beyond the product’s quality, we also discuss where and when to buy it.
We use sites and browser extensions like Honey and Slickdeals to compare deals, snag coupons, and research price history. Does it look like the price will go up or down? If it will probably remain steady, is there any rush to buy the product now? If there are coupons, when do they expire? Of course, a lot of the research depends on what they want to buy and the urgency around when they want or need it. We also discuss what goes into my decision-making process when I buy groceries and other products.
Help Your Kids Understand When To Use A Credit Card
Credit cards are not always a bad deal. You can earn cash rewards, raise your credit score, and be more secure with your transactions. Over the last few years, many businesses have stopped accepting cash or discouraged it by requesting exact change. So, while credit cards may have once just been a convenience, it’s now more important to understand how to properly use them, without falling into debt.
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