Helping Your Kids Learn about Personal Finance

Guest Contributor, Ally Tobias

You get an allowance from your parents and make a bit of money on your own, maybe by babysitting or mowing lawns. Do you spend every penny you make as soon as you get it? If you don’t already know about personal finance - how to manage money and use it wisely - now's a great time to find out it's not that hard. Here are some good strategies that will help you learn financial responsibility.

Start Young!
The first thing to know is that pretty much everything costs money. Food, clothes, must-have video games, even keeping your room warm in winter and cool in summer costs money. I bet at some time or another, your Mom or Dad said to you, "Money doesn't grow on trees." What they mean is that they have to get up and go to work everyday to make the money your family needs to pay the bills and make sure you have what you need.

A big part of being successful with money has to do with making the right choices. Do you want three small games, or the bigger, nicer one? Do you want one small toy right away, or are you willing to wait for few days more and get two? Are you hungry and want that restaurant meal right now, or would you rather save the money for that game you want and eat at home later? The concept of weighing your alternatives, budgeting, and saving can be learned when you’re quite young!

Honesty! Honestly!
Let's say you tell your parents you're going to put half your allowance money in the bank. On the way over to make a deposit, you see a shirt at Abercrombie you really want and you spend your entire allowance on it. What you did was called "impulse buying." But, that's not what you said you were going to do! Be honest with yourself and keep your promise to your parents. Work on resisting your impulse to buy - buy - buy. Use your head to make the decision, not your emotions.

Know the Value of Money by Knowing the Value of Work
A great way to learn the value of money is to have some extra chores around the house for which your parents will pay you. You probably already have some regular things you do, like make your bed, help with the dishes, and take out the trash. Sit down with your Mom and Dad and see if they'll agree to some other special chores, things they would normally do, but that you'd like to take responsibility for - things like keeping the deck clean, trimming bushes, watering the plants, or shoveling snow. Talk with them about getting paid for that extra work around the house. Start off slow and see how it goes.

Working at home for your parents will give you great experience when it's time to branch out and work for other people. Part-time and summer jobs are great ways to earn extra money to do and have the things you want. Just don't forget to save part of it! You could start a neighborhood lawn-mowing business or take a babysitting job, for example. Working makes you feel good about yourself and appreciate the value of the money you earn.

Get In the Habit of Saving
Whether you get your money from an allowance or a part-time job, some of it should go into a savings account. Your parents can help you set one up and explain how it works. It's fun going to the bank, making a deposit, and watching your savings grow and grow and grow!

Just like your parents, there will be times you may need some of the money you've saved. Just make sure you really need it for something important, not just the latest must-have gadget. This bring us to...

Drawing up a Budget
A personal budget helps you prioritize what you spend money on and when you spend it. Remember impulse buying? A personal budget can help you get that under control. If you're on your own, the basics you need first are food, shelter, and clothing. These should be always put ahead of fun items, like eating out and a new cell phone. As you get used to saving for basics, you can start calculating how much you can set aside in your savings and how much you have for the fun items. Try it and you'll see how helpful a good personal budget can be.

Establishing Credit
When you get older, most people get a credit or debit card. Credit cards use money that's borrowed from the bank. The important thing to remember with credit cards is to pay off the balance every month. Letting credit card balances go unpaid month-to-month adds up quickly, getting you into a downward cycle that's very hard to get out of. Getting to the point that you can't make the payments will ruin your credit rating, making it hard or impossible to buy a car or other big-ticket item later on.

Debit cards, on the other hand, take the money directly out of your bank account. It can get you in trouble fast, too; that is, if you don't watch the details and stick to your budget.

By now you see that being responsible with your money isn't rocket science, just common sense. Take some time and learn the basics - the good money habits that will step you off on the right foot when it comes to having a secure productive future.


Ally Tobias is part of the team that manages Australian Credit Cards, a blog about personal finance tips for teens and young adults. Follow ACC on Twitter. Before joining ACC, Ally was a Media Planner with McCann Worldgroup Philippines, Inc., with award-winning executions, including the Levi's 501 "Live Unbuttoned" global campaign.
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