The Importance of Teaching Kids to Be Financially Responsible Since Early On – Part 2
On our last entry, we started taking an in-depth look at the tough situation that many parents across the country face when they fail to teach their children early on about the importance of being financially responsible. Even more, several parents are now seeing their retirement funds evaporate as a consequence of them wanting to help their children financially with personal loans even after their kids are perfectly capable of earning their own money.
So let’s continue looking at the different ways in which parents can achieve more financial comfort while at the same time knowing their children are now perfectly capable of taking care of their own personal loans and finances.
One of the suggestions for parents most experts agree with is that parents should take at least between 12 to 24 months in order to allow their kids to stand on their own feet (financially speaking). The first steps for parents in order to achieve this is to start by removing the support they provide for smaller expenses. Some examples of this could be removing support for paying their children’s cell phone plans after the first six months. Then, a few months after that, they could stop paying for their kids’ car insurance. As time goes by, children can be already paying for all (or at least most) of their expenses by themselves, with parents only taking care of the mayor ones, like student loans or personal loans.
In the case of these, parents are advised to take care of their children’s personal loans and students loans for at least the first 18 months, which will pave the way for their children to have a far smoother entry into the real world. Additionally, by the time they start paying for their student or personal loans on their own, kids will have enough confidence to start facing those payments. Believe it or not, all of this responsible financial behavior starts from an early age and will usually last for the rest of their lives.
Another important aspect of teaching children about financial responsibility is to cultivate in them the heathy habit of saving money. Thus, prints could encourage their children to start saving a set percentage of every small amount of money they get, which will translate into them saving a set amount from their paychecks every month in the future. A very didactical rule for these cases is to teach children the rule of 50, 30, 20, which entails setting aside 50 percent of their salaries to cover for their needs (like repaying their personal loans for example), 30 percent for what they want, and about 20 percent their savings.
Trading is another extremely important concept that children should learn since early on, since it teaches them the value of money and of negotiation. Trading time for money, dinners out for meals at home, a weekend of hard work for a ticket to the movies. These are all fine examples of what parents can do to teach their children how to trade and how valuable it can be for their financial future.
Lastly, another important lesson that parents should teach their children about besides personal loan management, is to help them establish credit. In the future this will help them tremendously when they need to qualify for their own apartment or personal loans and such. To teach this, parents can ask their kid to take a small personal loan for a car (the most of which the parents will pay of course) so their children can have a history of having personal loans and of repaying it.
There you go. Parents who want their children to have a promising financial future free from personal loans and other debts can definitely learn a few things from these tips.