For better or worse, your financial fate doesn’t necessarily represent the one your children will have. Your less-than-prudent financial habits don’t have to be inherited, but by the same token your economic acumen isn’t genetic. Regardless of your past or current circumstances, one of the most valuable things you can give your kids is a debt free future, and there are a few things you can do to set them up for financial success.
Teach Them About Money
Don’t just assume that school is going to take care of financial education. Start teaching your kids about money early, and stick to it. Integrate them into your finances early on, whether that means having them hand over the cash when you go grocery shopping or earn an allowance. Encourage savings from a young age. It’s always fun to start with the typical piggy bank, but as they get older don’t hesitate to get them their own savings account.
Most importantly, help them to understand that spending has consequences. When they’re older, make them responsible for a specific recurring expense like their own gas, car insurance, or even lunch money. If they don’t have enough to cover the expense, let them live with the consequence whether it means taking the bus and walking instead of driving or whatever else may fit the circumstance. There are any number of ways you can keep your kids’ financial education going throughout their childhood, just be sure to be consistent from early on up through when they move out. Teaching them good financial habits early will help them better prepare for themselves later.
Start A College Fund
You know you should be saving for your kid’s education, but do you have any idea exactly how much or what to do with the money once you have it? Starting a designated college fund for your kids will help you see just how much you’re actually saving along with what kind of interest you’re bringing in. It also helps keep that particular portion of your savings separate and further from temptation to use it. Even if your child decides not to go to college, the money will be there to help them with whatever continuing education they may desire, or simply to help them get a head start when going out on their own.
Along with starting a college fund, make sure you have realistic discussions about what you can manage. If you’ll only reasonably be able to put away enough for a state school, set that expectation early on and work with your kids to understand what and education beyond your savings means.
Eliminate Your Own Debt
Lead by example. If your kids see you working hard to eliminate your own debt, they’ll gain much better understanding as to why it's important to be debt-free and what they can do if they ever do find themselves in debt. You don’t want to instill fear of debt in them - a little bit is inevitable. The way you manage yours, though, will shape the way they manage theirs. Handle it cooly, quickly, and responsibly and they will do the same.