Plenty of young adults move out on their own and rack up debt because they don’t understand the principles behind smart spending. A recent report found that 1 in 5 young adults under 24 with a credit record have debt in collections. That’s why it’s crucial to teach your kids the skills they’ll need to learn healthy financial habits and avoid debt from a young age.
Setting a Good Example
Your kids are watching you and being shaped by your actions. That means that when you’re teaching them smart spending habits, you also need to be a smart spender yourself. Don't be afraid to talk about your budget, especially when you’re not buying things your kids want because you’re saving for more important purchases.
Saving Before Buying
Your children should understand from a young age that if they don’t have the money to afford something, they can’t buy it. However, they’ll be able to afford it they’ve saved enough money for it first.
When your children ask for something they can’t afford yet, you have the perfect opportunity teach them how to develop a budget to make it happen. Sit down with them to discuss how much it costs, how much they want to save for it each week and how long it will take to have enough.
Learning to Shop
Another aspect of smart spending is buying things at the right price and finding good sales. Before heading to the store, have your children scope out good sales for what you need to buy. Then when you’re at the store, ask for their help in finding the best deal among available brands.
As your kids grow older, you can start talking about credit cards and how to use them wisely. An easy pitfall young adults fall into is mistaking available credit as new purchasing power and quickly racking up unnecessary debt. Teach them that it’s important to not make purchases they can’t afford and to try to only use credit cards for emergencies, or to plan to pay the full bill when it comes.