It has been months since COVID-19 or the coronavirus shook the world to its core. The coronavirus pandemic has affected many aspects of everyone’s life including jobs and businesses. Considering that most countries, including Australia, have implemented a lockdown– many people have either lost their job or are unable to work. Adults may easily understand the need to change some spending habits to maintain good credit and finance, but kids may find it difficult to comprehend.
What Your Children Need to Know About Good Credit and Finance
Earning money has always required hard work and determination and even more so now that a pandemic is taking a toll in the economy. Most people need to update their budget to match the current circumstances. The adults in the family will understand why they need to be strict with the budget, but kids will find it harder to accept why they can’t go out and buy their favourite snacks or the toys they like.
You can use this time to teach your children a thing or two about good credit and effective financial management. This new knowledge will help them as they grow older and starting them young is not a bad idea at all.
Here are some of the things that your children need to know about maintaining good credit and handling financials effectively:
How Earning Money Works
Although your kids can’t legally work at their age, they must understand how earning money works. For some kids, explaining that you need your job to work and earn is enough– but you can help them understand it better by rewarding them for completing chores. Even younger teens may not have complete grasps of how hard it is to earn, so letting them EARN their allowance will give them a better comprehension of it all.
How to Spend Responsibly
Once your children understand the concept of earning, they should also learn how to spend responsibly. This part is where you help them hone their decision-making skills and explain how spending their earnings responsibly is especially important during this lockdown. Help them understand the difference between their needs and their wants. For example, food is a need while toys are something that they just want.
How to Save Money to Maintain Good Credit
If your children understand how money is earned and how to spend them responsibly, it will be relatively easier to teach them how to save money. Since they are responsible for earning and spending their allowance, it will make sense for them to save some as well. But of course, you need to explain it in a way that they will understand. For example, you can tell them that if they buy a toy now, it will be just this one small toy, but if they save up– they can buy a set or an even bigger toy.
What Good Credit Is
As you know, maintaining good credit is easier than repairing a bad one. A good rule of thumb for this is teaching your kids that if they can’t pay something with cash then they can’t afford it. It is too early for you to teach them about personal loans or what to do in case they end up depending on bad credit loans. But, they are never too young to learn how to be financially responsible.
How to Budget
Teaching your kids how to budget is teaching them how to plan their spendings ahead. Budgeting allows your kids to put everything they’ve learned about earning, spending and saving to good use. It is a great opportunity for you to teach them about monthly income and expenses.
Again, you need to speak in their language and use their tools for them to absorb information better. Since they are probably stuck with their gadgets at home during the lockdown, you might as well teach them budgeting with the help of some budgeting apps.
The coronavirus pandemic may have made handling financials harder considering its effect on the economy, but it is an opportunity for some to learn better ways to handle money– especially the kids. As parents, help your kids come out of the pandemic as financially educated and responsible individuals who understand the value of good credit and effective financial management.
The opinions expressed in the Blog are for general informational and entertainment purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific investment product. It is only intended to provide education about the financial industry. The views reflected in the commentary are subject to change at any time without notice.