We are taught American literature, we learn about basic chemistry, and are told to memorize the state capitals, but nowhere in our schooling are we taught financial fundamental skills that are detrimental to our everyday lives. This is the reason why more than 80% of US households are in bad shape, some carry huge debt, others have damaged credit, and most Americans don’t understand the way money works.
If you have teenage kids in a few years hopefully they are planning on moving out and contributing to our GDP and being able to swim on their own and stay afloat, at least that's what every parent thinks of at this stage in life. If you don’t start to instill financial skills in your kids you might find them coming back home and starting on the wrong foot early in life.
I am teaching my kids at a young age. My son is 14 years old and has his own lawn service business and has established a Roth IRA with my help. My two daughters are getting ready to start their own business and when they are at the point of saving their money I will be assisting them at starting their own Roth IRA’s when they reach this point.
Here are some important Financial Skills to teach your kids:
1. Being able to budget is important
Showing your kids the value of spending less than you earn is vital to their financial future. This can be done in many ways, keep in mind that your system might not be well received by your kids, that's cause it works for you. Teach them to find a way for them to develop their own system of budgeting. Encourage them to build their own system to keep track of their allowance if they receive one, or a side gig if they perform one in their communities.
2. Retirement plan introduction
If you kids have a part-time job they may be offered a 401k, or if they are saving for college this would be the perfect time to talk to them about the different types of retirement products and services that are out there, I know they are young and they may not receive this information by heart. Even if you feel your kids are not listening to you they are listening. Just expose them and let them know these exist and what they are for. If you set up a retirement plan for your kids show them the reports your receive quarterly so that they can see the growth and how their rates of return affect their money.
3. Talk to them about how banks work
Talk to them about the bank's services they offer, and how bank fees affect their bank accounts. People tend to be penalized by bank overdrafts and ATM transactions fees and other fees, show them how this affects their bank accounts.
4. Talk to them about the good and bad of having a credit card
When your kid is about to start their freshman year in college I guarantee you that every credit card and banking company out there has all their tables set up to sign your kids up with their first credit card and they would receive some kind of insignificant free gift like a shirt for doing so. Talk to them about how interest rates work and how it would affect their lives if they are not responsible with these credit cards.
5. Debt should be another topic
Talk to them about being in debt and what it means to be in debt. Show them how to calculate debt to income ratios and why this is important to know. Talk to them about the different types of debt such as financing and how it works, calculating interest rates, and student loans, and personal loans.
6. Talk to them about what net worth means
This is important as they could be offered a high paying job when they finish college but this doesn’t mean that income alone will generate financial wealth. It important here to help them understand what builds financial wealth and the differences in things that can be a financial endless drain on their wealth.
7. Shopping smart
With all the information at our fingertips shows them the importance of a research in-depth purchase. Make them aware of all the resources that are available for those significant purchases they might consider later in life. This one might be a tough one as we all wished we could go back and not make those purchases that we didn’t need such as some type of features or name brand signature items.
8. Car Maintenance
It is important to show them the responsibility of maintaining a good running vehicle. Maintaining a good vehicle is one strategy that can help with finances as a vehicle could be a detriment to a persons financial situation. One good example could be running a vehicle until the wheels fall off.