(BPT) – At a certain age, kids stop listening to their parents on all topics except for one. Money.
Yet recent research conducted by Bank of America found that although this is the one area where teens and tweens actually seek advice from their parents, it’s one many adults avoid due to their own lack of confidence in managing their finances.
Whether you’re taking steps to proactively educate your children on money management or they’re confronting you with specific questions, be ready and equipped to help them learn about what’s important.
Following the five simple steps below will not only help you brush up on the basics and build your own financial knowledge but better prepare you to teach your kids about managing money responsibly.
* Expand your own financial knowledge. A recent Bank of America study on financial literacy reveals that 32 percent of U.S. adults recognize their lack of financial knowledge has led them to make poor financial decisions. Before you can educate your kids, make it a priority to educate yourself. Consider online resources as an easy way to expand your own financial knowledge. One option is BetterMoneyHabits.com, a free online learning platform offered through Bank of America’s partnership with Khan Academy, offering dozens of easy-to-understand personal finance videos on everything from using credit to saving and budgeting.
* Educate by example. Teens and tweens often model their behaviors after their parents – both good and bad – particularly when it comes to money. By setting a good example and responsibly managing your own personal finances, you can begin teaching your children without much heavy lifting. While you’re at it, check out steps to better money habits on BetterMoneyHabits.com to continue to build healthy behaviors your children can pick up on.
* Talk to your kids. We’ve all made mistakes with money at one time or another – the important thing is that you and your children can learn from them. Begin talking to your children about the financial decisions you’ve made in the past to help spur open, ongoing dialogue about money. Knowledge of your personal financial challenges may prevent your children from facing similar issues and discussing your good decisions provides them with concrete examples to follow.
* Get specific. Parents tend to give pie-in-the-sky goals to their kids – like the need to save for college – which don’t resonate. Focus your kids in on immediate goals – like saving for a bicycle or a treat after school. Prior to making a purchase, challenge your children to research and compare. This approach helps teach many important aspects of money management including smart shopping, budgeting, finding and negotiating good deals, and avoiding impulse purchases.
* Offer allowance. Once your children reach an age where you feel they’re comfortable with handling money, you can begin to offer an allowance. Whether it’s rewarding them for completing chores, good behavior or making straight A’s on their report card, make it clear to them what kind of expenditures the money is for and that they are expected to save some of it. This will likely be your child’s first chance at budgeting and managing money, so it’s important to give them the tools they need in order to be successful.
Of course, there are no “one size fits all” answers to your child’s financial questions, but when the questions do come, it’s important to be ready by empowering yourself. It’s critical that parents are confident in their own money management skills in order to teach the next generation.