Tuesday, June 24, 2014

Essential Life Skills: Money Management

money management

If not intentionally taught, money management is often ‘caught’.

Evaluate your own money management skills to determine if you want your children to emulate them.

The thing about managing money is you need to have some to be able to manage it.

 Determine how your child will get money.

Different families do this in different ways based on the age of the child and the family policy.

Some ideas include:

1.  An allowance- we never really gave much of an allowance.  To encourage diligence with chores we gave ‘mom money’ and ‘dad dollars’ that were redeemable for special time or small items.

2.  Payment for extra chores- we do this sometimes.  My daughter does get paid to mow the lawn since it is a big job.  This pays for summer camp, etc.

3.  Entrepreneur- my children have done a variety of things: tutoring, babysitting, giving music lessons, selling eggs, making and selling candy, etc.  Brainstorm with your student to see what they might enjoy and get the word out that they are open for business.

4. Get a job.  Older teens can get a ‘real’ job that gives them job experience and an income.

Now that they have some money to manage, here is where you teach them how to manage it.

 The first step is to help them determine a budget.

A Budget should include:
    Savings- how much should they save from their income? Determine a percentage.
    Giving- what percent will they give to church or charity
    Expenses- what monthly expenses do they have?  gas, phone, etc?
Open a bank account
    If your child doesn’t already have a bank account in their own name, they should open    
    one; savings, checking, or both.  

Students should be taught how to balance their bank statement and checkbook (do they use those anymore?)

Students under the age of 18 cannot get a debit card without tieing it to their parents account.  You decide if you want to do that.  I personally do not like debit cards and don’t use them.
My young adults do use them, but one discovered recently that it can be used by others, if lost.

Credit Cards
It is critical that your students learn how credit cards work before they go out on their own.  You don’t have to get them a credit card to teach them about credit cards.  
Many unsuspecting young college students get caught in the credit card companies lure and have a large debt before they know what hit them.  

Students need to know that if they can’t pay the card when the bill comes, they shouldn’t make the purchase.  

A good resource for teaching students about money management is Dave Ramsey’s new book Smart Money Smart Kids: Raising the Next Generation to Win with Money

Dave Ramsey does advocate a cash only system, which I don’t follow, but you determine what is best for you and your family.

I think my children mostly ‘caught’ their money management lessons; some did a better job at it than others.  

Teach your children money management skills before they leave home.  Trying to teach them what you missed later will feel like you are sticking your nose in their business.  

Trust me.  Do it.

Other posts in this series: Cooking, Clothing Care

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