You can’t do enough to prepare your children for ‘the real world’. At the same time they deserve to have their childhood and be protected from the real world intruding upon their innocence. Giving financial advice to children and preparing them to manage a budget and save remains a controversial subject among parents. Should you let them ‘earn’ money for chores, or give them an allowance regardless of what they do in the house? Should you share your own financial concerns with your children and help them foster an interest in the economy or protect them from monetary worries?
My belief is that you need to reach a happy medium with all of the above. Children need to have an awareness of what is going on in the world around them, but they should also be protected from unnecessary worry, which they will learn to have plenty of as young adults. I don’t think children should ‘work’ for their living as such, but instead they should learn to understand that if the house work doesn’t get done, you will have to get in a domestic worker which will cost money and leave the family less to spend on luxuries.
Some Psychologists say that children should not be given financial rewards for good behaviour; otherwise it is seen as bribing your children to be good. Instead, they should be praised for good behaviour, and disciplined for bad behaviour. Their allowance should always be constant and reasonable and they should learn to save up for what they want. If they ask you for the latest iPod in the shops, you can tell them that they must save up out of their allowance. You can sit down with them and work out how much they should put aside each month to afford the iPod. In this way you teach them to draw up a budget. They can take into account how much they spend on school lunch, and going to the movies with their friends, and on the clothes they want and then they’ll see what’s left over.
My friend, who I can honestly say is the best budgeter in my acquaintance, was given a little black book and pencil by her father when she was ten years old. She learnt to write down everything she spent her money on, and when her allowance was used up then that was it for the month. She is 27 now, and still buys a little black book every year to keep abreast of her budget.
A credit card for their teenagers or young adult children is something that apparently some parents consider providing. Financial Advisor, Suzy Orman says that you should only consider giving your child a credit card if you know that they will be responsible with their finances and you should teach them to pay off the full amount each month. I disagree in part with her. I think you should never provide your child with a credit card; this is something that they can earn while working. It is important, however, for young adults to know how the credit process works, so I would advise taking your children with you at about age 16 to set up their own bank account and chat to a bank manager about how loans and credit works.
The last thing you want for your child is to end up like the protagonist in the recent movie, “Confessions of a Shopaholic” where she had maxed out 12 credit cards. Unfortunately, credit card debt is something young adults often find themselves caught up in, so it is important to educate your teenagers about the possible evils of credit cards, but from there on they can learn to manage them on their own in adulthood. Don’t be afraid to be strict and unyielding with your children – they need the guidance. At the same time, everyone deserves a happy childhood and a few treats.