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Debt Management – Teaching Children How To Handle Money

When you are raising children, one of the most important things to teach your children is how to handle their money. Children should be taught at a young age that you can’t always get what you want, when you want it. This automatically means that you can, and must, say "no" to children every now and then.

Of course, when they are capable of understanding, you also need to explain why you are doing this so that they do not get the impression that you are being harsh or depriving them for no reason. If you are able to train them in this way, they can begin to learn about prioritizing their wish list and getting perspective on spending.

Once your child reaches an age where you feel they are capable of handling a small weekly allowance, it should be made clear to them that a percentage of the money provided to them must be put away (saved). The portion saved should be at least 20%, but can be up to 50% - that is a matter for you, and depends on your own philosophy on saving.

Of the remainder, a percentage should be donated or applied to help others, and the balance can be spent. Since a child has no obligations to payments whatsoever they don’t really need the money. You are providing their home, food, toys and clothing, so they really do not “need” a great deal to spend – perhaps an occasional candy or a little toy. Keeping this in mind you don’t have to give a six year old child a $10 weekly allowance.

Keep the amount reasonably low so that they can run out of their money and know that’s it. When your child grows older their needs change and with that their judgment changes. You should still enforce the saving, giving, spending percentages, but they may start to nag you about additional money so they can get something that everyone else has!

The golden rule is to not give in without anything in return. You may like to allot your child some chores in order to earn some extra money. This way they learn that money should be earned and not merely handed out on a whim. You have to earn your money, so your children can too. As a parent you are obliged to provide a roof over their heads and provide for their meals, but it is also your job to prepare them for responsibility as an adult, not to spoil them rotten.

One way to teach your children about wise shopping habits is to give them the following challenge. Get them to actually check out different prices and compare them before buying anything by giving each child a list (how long will depend on the age of the child) of what you need and some money to purchase these items. Allow them to keep any change after they have purchased the items on the list.

You can be assured that they will go out of their way in order to keep as much change as possible in their own pocket. Depending on their age, you may even like to give them the opportunity to check out a number of different stores to fill the list.

Once your child is old enough to understand, you can sit down with your child and tell or show them what expenses you have to pay for every month. A lot of people keep their financial affairs from their children, but when you share this information with them, they know what to expect in the future. If they do not learn the process of balancing a budget and meeting monthly expenses from you, they will find it difficult to manage once they leave home.

If you take the time to educate your children about financial matters while they are young, you will have peace of mind when they are older, because you will know they can be trusted to handle their own finances.

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