Give your kids basic financial tools

This was originally published on Monday, February 20, 2017, in the Pacific Daily News.  Click here to subscribe to the PDN.

Finances are difficult for some adults. Many have learned the hard way that messing up their finances can create a dire situation. Giving kids the financial tools they need prior to heading out on their own is an important role of a parent.

You can help them discover the difference between earning, spending and saving. Children will also learn the value of money. Introducing them to finances at an early age gives them a head start to a healthy financial future.

No matter what age, here are a few important lessons to teach your children about personal finances:

  • Money does not grow on trees. There’s not an endless supply. There are limits to how much money you have. Many kids see adults swipe a card and see money comes out of and ATM. Instill in them that whether it is a credit card or debit card, it is tied to real money, even though they do not see it. By setting up a savings account, they see for themselves first-hand how the concept works.
  • Money is earned. Whether it is a plastic card or money in hand, many kids don’t understand the effort it takes to make money. Of course they see mom and dad heading off to work. But do they know how hard you work? By giving kids the opportunity to earn their own money, they can get a better appreciation for you and learn the value of money. This teaches a work ethic and makes them more invested in the choices they make.
  • If you want it, save for it. Video games and other electronics that most kids fancy these days can cost a lot. Giving into every request for a toy doesn’t teach kids how real life works. Teach them the idea of saving their money for things they want. If it is worth having, it is worth saving money. This is a very valuable lesson about how we get the things we want in life.
  • Making choices. Spending for something now means not being able to afford something later. Help them think about their goals and aid them in making the right choices. Most adults face severe consequences when they make the wrong financial choices. You can help them learn this lesson early in life, at a time when making the wrong spending decisions does not affect them as much.
  • Credit and investing. Irresponsible credit usage is a cycle that is hard to break. Many use credit to pay off other credit and around and around it goes. As kids get older, you can teach them about renting a house versus owning a house. Teach them about investing in the stock market. Talk about compound interest and how it applies to credit and investing.
  • Rainy day savings. Start them from a young age with the idea that putting money away for an emergency is a necessity. If they learn this habit as a child, they will most likely continue it as an adult. Having an emergency fund will reduce the likelihood of taking on more debt.
  • A good lesson every child should learn is giving. Giving a little money to a worthy cause can go a long way. It builds self-esteem and self-worth. Understanding that they are part of something bigger and looking outward will help them become productive citizens.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at moneymattersguam@yahoo.com and read past columns at the Money Matters blog at www.moneymattersguam.wordpress.com

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