Teaching Your Children About Money

Teaching your children about money is one of the most important skills that you need to pass onto your loved ones

. Schools do not regularly feature this on their curriculum, and you need to fight against the usual marketing power of credit card companies who eventually will prey on your children as soon as, or even before they leave the nest.

A Healthy Relationship

The key lesson to teach is about maintaining a healthy relationship with money and debt. What is happening in the current climate, is you have two groups of young people.

One group has fallen in love with the glamour, leadership of celebrities, and appeal of credit cards and store cars, they'll almost 'boast' about the size of their debt to their friends, almost giggling as they talk about how 'terrible' they are at self restraint. Similarly to alcohol, to many students, spending beyond means seems to become a fashionable excess.

The second group has learnt the lessons of the indebted older generation and avoid credit cards and debt like the plague. These individuals don't even own a credit card, and many even avoid University, citing debt as one of their biggest concerns.

At the end of the day, debt is not the enemy of society. Credit cards can be used for very good reasons and very sensibly, such as for buying holidays or goods online for that added protection that only a credit card can offer.

Credit cards can also be used for one-off & unexpected expenses that you didn't budget for, but can be paid off after the next pay cheque.

Similarly, student loans are a fantastic form of debt. They carry no form of bankruptcy risk, and in the UK carry only an interest rate equal to inflation, meaning the real value of the debt does not increase. University is a value-added activity. This means that graduates on average receive higher lifetime salaries that by far outweigh the cost of attending. For this reason, it's tragic if a student would ever turn down university for financial reasons.

It's clear that a healthy balance needs to be found. You need to ensure your child spends within their means, but also utilises the benefits you can get from using a credit card, taking out a mortgage and taking on student loans.

I recommend that your encourage your child to learn more by making sure they open a bank account, apply for a credit card and more. Be there when they make a financial decision for the first time, to ensure that they avoid pitfalls. Finally, monitor their spending where possible. If a child is being secretive then this is a cause for concern. Exert good leadership over your children by ensuring you set a good example. No child will follow the lead of their parents without this.

by: matthew Anderson

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