People are constantly making excuses for their poor money management–“it is just not something I am good at”–but the fact is, no one comes out knowing how to manage money well, and ANYONE can be good at it. So, how can you teach your children about money management so that they do not face the hardships of the burden of debt, and poor money management choices?
Start by talking with them about money on a regular basis. It might be a short conversation in the store about not getting something right away, no matter how bad you want it, because you do not have the money for it today. This will help teach them not to give in to the lure of instant gratification thanks to credit accounts. It might be a discussion of how to lower bills by being more conscious about energy consumption, or food waste. This helps teach them about the value of money. Kids are never to young to learn about money, and how to manage it, and as a parent, you should be incorporating lessons about money into your daily life.
In addition, if you want your children to learn how to manage money well, you have to be a good example of that. Your children should watch you buying things only when you have the cash, or funds in your checking, to do so. You should teach them about credit, and why it is important to use credit cards and establish credit worthiness, but how you have to be careful not to become reliant on it. If your child sees you buying uncontrollably, or always swiping plastic, regardless of whether or not you can afford the merchandise, those same traits will carry over to them. However, if they see you making purchases carefully, saving for the things you want and need, and never exceeding your income, that too will carry with them. It is easy to justify a bad habit if you see your parents doing the same thing. Don’t let them use you as an excuse.
If you are a bad example of money management, do not hide it from your kids, instead, use your mistakes to teach your children valuable lessons. For example, if you have incredible debt, and your child complains that they do not get to vacation like their friends, etc. you can explain to them that because of hasty purchases, and bad decisions, you are slave to your creditors, and until you learn to live within your means, there will never be extra for fun things because it will get eaten up by interest.
Talk to your children about interest, credit, loans, and the like so that they are familiar with the pitfalls, terminology, and uses. The more familiar they are with things, the better they will be at making informed decisions.
Lastly, give your children an allowance so that they can learn to use money on their own, through trial and error before their needs are too deeply affected by their financial decisions. This gives them a chance to learn how to use money BEFORE it can damage their credit, or cause them to get in too far over their heads.