Teaching Kids Responsible Spending Habits

    Published: 06-16-2009
    Views: 16,265
    Financial planning professional and member of the Financial Planning Association®, Marguerita Cheng, CFP®, CRPC, gives some tips for getting kids to make smart spending decisions, as well as teaching them about debt and investing.

    Marquerita Cheng: Hi! My name is Marquerita Cheng, and I am a member of Financial Planning Association. Today I am going to talk about teaching your kids to spend money wisely. First, Allow your kids to make their own spending decisions with their money. To get them start, ask them Why they plan to buy something? How they plan to pay for it? And what they'll have to give up in return? With older children, make sure they understand what you are willing to pay for and what expenses they must cover. Keep the agreement ironclad to teach your teens accountability. Be ready to say no when they run out of money and ask for more. Next, Have your children keep a budget to track how much money they have coming in, and going out. Once a week or once a month, sit down and discuss how well they are following their budget, even if they blow it, they will earn some important lessons. Younger children can keep a simple budget with different envelopes for Saving, Spending and Sharing. Go online to find other resources your teens can use to help manage their money. Then be sure your kids understand that. Explain that credit is not money you have, debt is what you accumulate when you spend more money than you have. Help your Child learn about credit while they are under your roof. You could co-sign a low limit credit card with your teenager to use for agreed upon expenses. Make sure the bill comes to your teen every month, and that they pay it in full and on time. Finally, don't forget about investing. Talk with them about their future, What career they would like to pursue? What education they will need? And How you will work together to achieve that goal? Explain that they are investing in their future when they study hard and earn good grades in school.

    And make sure they always understand that their self-worth is more important than their net worth. Managing money is a lifelong skill, so teach your kids good habits early on.