Children often go through life with little understanding of money or sometimes no understanding at all. Failure to properly understand finances and budgeting can leave children with a misconception of money which can follow them into their adult life.
Every Budget Has a Boundary
Most children grow up without realizing what a budget is or that every budget should have a limit. Most Utah mortgage lenders recommend that your house payment be no more than ¼ of your take-home pay, and the total value of your car should not exceed half of your annual income – even if it was purchased with cash. Whether it is a budget for mortgage payments and monthly expenses or budgeting for a large purchase or event, it is important to set a limit that you can reasonably sustain financially.
Money is Earned, Not Given
Throughout their adolescence, your child may come to expect a weekly allowance or a certain amount of spending money they can use for toys, wants, or outings. While some children will be required to work hard to receive that weekly amount, many will not have to do more than straighten their rooms and some will get it without doing anything. It is important for children to realize that in the real world, every dollar they spend will have to be earned by hard work. This will not only help prepare your child for the real world it also may help them to appreciate what they purchase with the money as well.
Money Doesn't Define You
It is important for you to let your child know that while money is integral to surviving and having a good life, money does not define who they are. Often adults will compete to have the most toys or luxurious lifestyle because they truly believe that having these things and appearing to have more money than others makes them a better and more important person. When you grow up believing that money defines you, you are more likely to spend outside of your means to please the outside world.
Spending More Requires Earning More
If your child develops a taste for the finer things in life it is important to help them realize that the more money they plan on spending, the more money they will have to earn. You will want to make your child aware that any excess they want to have will require putting in additional work to earn the money to pay for it. They may they realize the trade-off may not be worth it.
Money is attached to The Plastic
While plastic has made shopping quicker and easier, it often causes us to disassociate the purchase from actually spending money. Children are often under the impression that you can simply continue to take your card to the bank to get more money and seldom realize that even the plastic has a limit and overuse can result in paying a lot more for items you might not need.
Whether it is budgeting for mortgage payments or learning about interest rates on credit cards, it is important to teach your children the value of money early on so that they will be able to be a financially responsible adult.
