Teaching your kids to be financially savvy could help them to be financially confident and successful in the future. As credit card debt and low retirement savings continue to frustrate many Americans, you can help your kids steer clear of these and other financial pitfalls by talking to them early on about the value of money.
In fact, people who have had financial education participate more often in retirement programs, make larger contributions to the programs and have a much higher savings rate than others, according to research from the U.S. Department of the Treasury.
Here are five tips to get the conversation started:
• Household finances: Expose your kids to age-appropriate information about your household budget and show them what it costs to keep your home running.
• College is key: Have your kids research various job titles, both those requiring a degree and those that do not, along with their corresponding salary ranges, so they can see first-hand the impact a higher education can have on their income.
• Needs versus wants: Help your kids understand that a need is something you have to have, like food, versus something that would be nice to have, like the latest video game.
• Credit cards versus dollars: Talk to your kids about the pros and cons of credit cards, the importance of paying a balance off every month and how interest rates can make you pay more money.
• The importance of saving: If you don’t already, consider paying your kids an allowance and encourage them to set aside three different funds: money to save, share and spend. Take them to open a bank account, and show them how they can build their wealth by contributing regularly and earning interest.