Financial illiteracy is a growing problem in today’s society. Many of us are just treading water with making ends meet, barely saving and sometimes missing bill payments. The issue is that most people lack basic money management skills and, instead, utilize lifelong poor habits. Even if your money management style hasn’t lead you into bankruptcy, the real question is whether you are setting a good example for your family and the next generation of money managers.
Growing Healthy Habits
Children learn much of what they carry into adulthood from their parents. While some watch their parents struggle financially and vow to be different, the majority of young adults experience some trouble with credit debt. Here is what you need to know to protect your children and encourage them to practice smart money skills:
1. Credit reports are important — even as a minor your child is at risk of having their identity stolen and used fraudulently. Be sure to monitor your child’s credit report annually, and teach them the importance of continuing to monitor their report as an adult. Ignoring a credit report can mean the difference in smooth finance and a turbulent road to credit recovery.
2. Start young — children need lots of practice to master a new skill, and the same is true for money management. Teaching a child to save their money, to only use what is needed to fund a purchase and set financial goals, is a vital skill for their success as an adult. As a teenager, the experience of balancing checking accounts, using credit and even the experience of overdraft can teach them valuable experiences about how easy it can be to get into financial trouble.
3. Keep communication open — money management should be a family affair. Get everyone involved in setting goals for family purchases, designing a plan to achieve that goal, contribute earnings towards the goal and monitor progress. When children become active participants in the make money management process, it sticks with them into adulthood.