It comes as no surprise that the most significant source of stress for most Americans is money. Furthermore, financial literacy or financial knowledge in this country is low. We still have a long way to go regarding financial education activities, especially for young children.
Here, we see the importance for parents to help their children prepare for a financially prosperous future. Read on to learn more about money-saving tips your kids won’t learn in school.
Tip 1: Make Consistent and Early Investments
The vast majority of youngsters do not think about saving for a car, a house, or retirement. However, they will benefit from compounding if they start early—children who invest early and frequently profit in the long run.
If the child is under 18, the parent can open a custodial brokerage account in the child's name to begin the investment journey. Savings are invested so that they provide a buffer in the event of a market correction. To motivate your child, consider starting with index funds and compensate them by matching a portion of their investment.
Tip 2: Determine Creditworthiness
Begin by opening a credit card in your child's name and linking it to their bank account. Set up automatic billing for monthly payments such as Netflix or their cell phone bill. After that, they should set up automatic payment for their credit card payments. As a result, they build credit and seldom miss a payment.
A secured credit card with which they can earn a $500 credit line is the greatest option if your youngster does not qualify for an unsecured credit card. They can use it to improve credit in preparation for applying for an unsecured card. Keep their first card open and use this to build credit history.
Tip 3: Use Your Credit Card Wisely
Children must be taught early on that debt may negatively impact their financial standing. So when it comes to borrowing, always instill in your children a feeling of responsibility. With excellent credit, they will qualify for a better rate and pay less interest.
For novices, provide examples of "good" debt (mortgage) and "bad" debt (credit cards or auto loans). Maxing up a credit card, on the other hand, is not ideal. To save money on loans, look around for the lowest available interest rate.
Tip 4: Budget, Budget, and Budget Some More
Keeping track of their money is necessary for them to keep their expenditures under control. Make a budget with them to get them used to track their expenditures.
Students need a budget to start saving and investing in the future, so they must develop the habit. Even with just a simple budget, children are taught about the input and outflow of money and to save money to purchase things they want.
Tip 5: Live within Your Means
Children often spend money on a range of things. Consider, for example, high-priced lattes, new phones, trendy clothing, and more. Living beyond their means implies that they are unable to make monthly credit card payments.
Encourage your child to think about their values, their relationship with money, and spending wisely. Allowing your children to work throughout the summer is a great approach to teach them this lesson! Having their own money will enable them to learn from their mistakes and pushes them to think about their future financial decisions.
Are you looking for a user-friendly money app for kids? Kiddie Kredit is a mobile app designed to educate children with the financial knowledge they’ll need for the future. Everything you’ll need is here, such as chore customization, credit monitoring, educational content. Download the app today!