It is extremely important to teach your child how to build good financial habits from a young age. Having an understanding of personal finance and establishing long-term goals for their financial future is something they do not learn in school. As parents, it is up to you to teach your child the ins and outs of spending and saving money.
Why it is Important to Save Money?
It is extremely important to save money, not only to plan for the future but to also have an emergency fund just in case. One way to help your child save money is by opening a savings account with their own checking account. Then every time they get some money in hand or get paid, teach them to put a portion of it into their savings.
Examples of Good Money Habits
- Find a financial advisor
- Make a monthly budget
- Pay bills on time
- Set a savings goal
- Always know the amount of money you have in your bank account
Examples of Unhealthy Money Habits
- Spending money you do not have
- Over-charging your credit card
- Impulse buys
- Not paying your bills on time, resulting in late fees
A good habit to start is any extra money should be deposited into a savings account instead of spending it on impulse buys.
The Smart Way to Use a Credit Card
Another great way to teach your child about good money habits is to sign them up for a low-balance credit card. This will teach them the habit of paying off monthly expenses. Teaching your child the smart way to use a credit card is critical as well. They do not want to find themselves in a future financial situation where they cannot pay off their card and they fall into credit card debt. Credit scores can positively or negatively impact your child’s financial goals and if the balance is not paid off on time, balances and interest rates will climb.
Teaching your child to use their credit card for bigger expenses like paying off student loans or strictly for emergencies is the best method. For all other expenses, encouraging them to use their debit card with the money they actually have in their bank account is the best way to manage their money.
Better Money Habits Will Positively Impact Your Childs's Financial Future
Money management is a valuable skill to learn at a young age. Building and establishing good spending habits will help your child understand the importance of saving money, planning for emergencies, and creating a savings plan. TDECU is here to help you and your child on your financial journey.