Debt is Dumb

One reason that people get themselves into trouble with debt is that they were not taught the dangers of debt, and the importance of having savings. Teaching kids to manage money is an important responsibility of parents. You must teach them how to work for money, rather than just giving it to them, so they can appreciate its value. If they work for it, they are less likely to waist it. Chores and report cards are great ways to help kids work for money.

To start teaching them get them a piggy bank. This can be a simple mason jar or something cute. While they are young the physical piggy bank allows them to visualize the process of saving. You can further teach them to save and invest by offering them interest on what they leave in their bank. This will help you teach them what happens when they put the money in the bank, so as they age you can move their money to an actual bank rather than the piggy bank.

Teaching about checking accounts and credit cards are also essential for good functioning in life. You can teach them about checking accounts by allowing them to carry homemade checks for their piggy bank, and allowing them to use them at stores with you, to have you make a purchase. If they over draft you should charge them a fee on their next income just as a bank would, and if they are trying to buy something they obviously do not have the money for you can deny the transaction just as a debit transaction can be denied at a store for insufficient funds. You also need to teach the importance of tracking the balance of a checking account, by balancing a check book.

As for credit cards a good teaching method is to give them a fake one to be used while at the store. You should teach them that if they use credit that interest is charged, both before they use the card, and each time you take the interest from them. If they use their card to make a purchase when you get home retrieve the cost plus five or ten percent from their piggy bank. If they spend money they do not have and do not work it off in a week you can charge them a one dollar late fee to teach them about fees.

The simpler lessons like saving are okay for younger children, but credit cards and checking may not be understood by younger children and only cause frustration. For this reason I recommend that if you are going to use these methods that you start them at 8 or older. At this point they are old enough to do chores, and even ask neighbors about chores that need to be done for 50 cents, a dollar, or two.

Not only should kids be taught how to manage money, but they should be taught how to give back when they have money. The bible teaches use that we should tithe on our increase. This means that one tenth of what we earn does not belong to us, but should go to doing the Lord's work. You can teach your children about giving to worthy causes, and churches. Teach them about service to others and donation of time and money to help those who are unable to help themselves, or donating to charities that help people get up and on their feet.

If you teach your child these lessons they will enter the world more prepared than most 18 year old kids. They will avoid traps like credit cards and over draft fees when they go away to college, or are not under your roof. This is a solemn responsibility of parents, and one that your children with thank you for one day, when they see their friends struggling to get out of debt.