It is very important to teach your child about managing money from an early age. This is especially the case in the unstable economic times of today’s world. Our children deserve the best financial future and this starts with them learning how to properly manage money.
Sound money management skills are foundational to building generational wealth. Generational wealth ensures that our children get a head start in life instead of starting their adult lives upside down in debt. And it is never too late to start building generational wealth. Even if your child is already an adult there are ways that you can start paving the way for a solid financial future for them and for future generations.
Building generational wealth starts with education. It is most beneficial if your child has a sound financial literacy base from an early age. As they are learning how to count, add, and subtract, they should also be learning about how money works. The following are some simple ways in which you can begin teaching them about money management.
Open a Bank Account
It is important for young children to learn about the importance of saving money as a means of securing their financial future. Piggy banks are great for this purpose. However, bank accounts are even better. When a child has access to a bank account, she can actually see the impact of savings in real-time. With a bank account, she can review her savings account balance, which gives a graphical depiction of how money grows over time.
It’s a bit more difficult to teach such a lesson with a piggy bank. Since she doesn’t have continual access to money in a piggy bank until it is broken, she can’t easily visualize the progress of her savings efforts.
Another benefit to bank account funds is that they are not as easily accessible to the child as piggy bank funds. This means that your child can’t just break open a porcelain vessel at any time. This alone teaches her a valuable lesson about storing money over the long haul.
Ultimately children over the age of 7 should have a bank account in their name. They should likewise know how to interact with the bank account. Allowing them to make regular deposits into their accounts teaches them the value of consistency.
As they grow older and begin to understand money at a higher level you can even teach your child how to responsibly use a debit card. Additionally, you can show your child how to pay bills from a bank account so that she can become even savvier with her money. There are many other tools that you can use to show your child how to properly manage a bank account. The ultimate goal in this process is for her to learn basic money management skills from an early age.
Establish Credit
Getting your child a credit card may sound counterintuitive, but acquiring and building credit is a major part of wealth building in capitalistic societies. It is likewise a very valuable part of teaching your child how to properly manage money. It provides the foundation for her to acquire wealth-building resources in the future and it can teach her foundational principles of debt management.
A solid credit history is the key to qualifying for house, business, and other types of loans. Houses and businesses are very important tools for building generational wealth. Establishing your child’s credit from an early age puts her on track to easily qualify for loans related to such purchases.
One of the primary and easiest ways of establishing credit for your child is through a credit card account. As early as 13 years of age, adolescents can be added to their parent’s credit card accounts. This provides them with their own credit card for making purchases and it likewise begins to establish their credit history.
Obviously, you don’t want to recklessly put a credit card in the hands of a 13-year-old. In fact, you don’t have to do so at all. You can add her to your account while maintaining her credit card for safekeeping until she is mature enough to use it. Likewise, you can give it to her but have direct supervision over the purchases that she makes with it. I only recommend the latter option if you know that your child is mature enough to handle such responsibility.
Beyond adding your child to your credit card account, you will need to properly maintain your credit in order for this process to be beneficial for her. Your child effectively inherits your credit history. Therefore, your ability to appropriately use the credit card will reflect on her credit history. This guideline is only applicable to the cards in which your child is a secondary cardholder. She won’t inherit other aspects of your credit history that her name is not associated with.
Start a Small Business
Business ownership is another easy and smart way to teach your child beneficial money management skills. You can manage the business or establish something solely for your child. It doesn’t have to be anything expensive or elaborate for it to serve as an effective lesson in money management.
You can do something as simple as monetizing a YouTube channel, podcast, or blog. If your child likes to paint, write, draw, or otherwise engage in creative endeavors you can help her publicize and sell her work. She can even set up a vendor stand at a local farmer’s market or online. There is a multitude of ways that you can get your child started in business ownership with little effort and/or money.
While you are not obligated to spend a lot of money on the business, you are likewise not relegated to keeping it small. You can definitely go all out and establish a thriving enterprise that can benefit your family for many generations to come. The important part of this process is to keep your child involved in as many ways as possible. This way, she can learn many facets of money management, inclusive of making, saving, and investing money.