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5 Fun Lessons to Help Make Your Kids Financially Independent

5  Fun Lessons to Help Make Your Kids Financially Independent

Formal education does a great job of teaching children how to read, write, do math, and determine the age of the earth using mass spectrometry, but there’s one lesson that still falls on the shoulders of parents to teach, and that’s financial responsibility. Until there is a classroom devoted to budgets, savings accounts, and investments, parents will need to continue to think of creative ways to impart their monetary wisdom. Use these five fun tricks to help make the lessons stick and help make your kids financially independent.

1. Piggy Bank

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    A piggy bank should be a fixture in every child’s room. They’re as important as a night light or pajamas with feet built into them. Every chance you get you should drop some change inside, shake it up, and act like it is the greatest thing in the world. Your child may not fully appreciate what is going on at first but eventually they will develop a sense of ownership over their money and create positive memories and attitudes around saving.

    2. Lemonade Stand

    Steven Depolo lemon
      Steven Depolo via flickr

      Tried, tested, and true, the lemonade stand is not only a classic memory for every child, it teaches important lessons about money. By dishing out lemonade to passersby (with adult supervision, obviously) a child can quickly learn basic lessons about supply, demand, and managing income and expenses. Fresh lemonade may taste better and draw a bigger crowd, but nothing multiplies your margins like lemon crystals from a package. Do this right and lend a hand where necessary and you will have a little entrepreneur on your hands in no time.

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      3. Allowance

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        Starting from around the age of five you can bring an allowance into the equation. Sit your kids down and have a conversation about responsibility and pitching in around the house in exchange for a little money at the end of the week. An allowance should be your child’s first experience with steady, reliable income and it opens the door to many more lessons about the different uses of money, that things are earned and not an entitlement, and the idea of money as a finite resource.

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        4. Saving, Spending, Sharing Jars

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          A great way to drive home the finite nature of money is to expand the notion of the piggy bank to create separate saving, spending, and sharing money jars. Again, this works best with an older child who is getting an allowance. The way it works is each time your child gets some money, they are responsible for dividing it into each of the three jars. The spending jar is for things like candy bars and water guns and other small expenses that pop up during the week; the sharing jar is for buying birthday gifts and nice surprises for friends and family; and the saving jar is off limits for everything but larger, longer-term expenses like a new Lego set or video game. The saving jar transitions nicely into the eventual savings account you should open with your child at the bank.

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          5. Offer and Encourage Ways to Earn More Money

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            Finally, if you child has their eye on some extravagant item like roller skates or a new bike but is getting frustrated at saving towards it with a $5 or $10 weekly allowance, give them other opportunities to increase their income. Put a price on household jobs that aren’t part of their regular chores. Clean the attic and make an extra $10. Mow the lawn and that is $5 in your pocket. Even help your kids offer their services to your trusted friends around the neighborhood. This will help instill a strong work ethic and a mental connection between effort and reward.

            Featured photo credit: Steven Depolo via flickr.com

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            Last Updated on March 4, 2019

            How to Use Credit Cards While Staying Out of Debt

            How to Use Credit Cards While Staying Out of Debt

            Many people will suggest that the best thing to do with your credit cards during these tough economic times is to cut them up with a pair of scissors. Indeed, if you are already in huge debt, you probably should stop using them and begin a payback strategy immediately. However, if you are not currently in trouble with your credit cards, there are wise ways to use them.

            I happen to really love my credit cards so I will share with you my approach to how I use mine without getting into deep financial trouble.

            Ever since about 1983 when I got my first Visa card, I continue to charge as many of my purchases as possible on credit. Everything from gas, groceries and monthly payments for services like my cable and home security monitoring are charged on credit. Despite my heavy usage, I have maintained the joy of never paying any interest fees at all on any of my credit cards.

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            Here are some tips on how best to use your credit cards without falling into the trap of paying those nasty double-digit interest fees.

            Do Not Treat Credit Cards as Your Funding Sources

            Too many people treat their credit cards as funding sources for major purchases. Do not do this if you want to stay out of trouble. I use my credit cards as convenient financial instruments so I do not have to carry around much cash. In fact, I hate carrying cash, especially coins. When you buy things on credit, the purchases are clean and you will not get annoying coins back as change.

            I do not rely on my Visa, MasterCard or American Express to fund any of my purchases, large or small. This brings me to my golden rule when it comes to whether I will pull out any of my credit cards either at a retail or online store.

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            I never purchase anything with my credit cards if I do not have the actual cash on hand in my bank account.

            If I really cannot pay for the item or service with cash that I already have at the bank, then I simply will not make the purchase. Remember, my credit cards are not used as funding sources. They are just convenient alternatives to actual cash in my pocket.

            Make Sure to Always Pay Off Balances in Full Each Month

            The next very important part of my overall strategy is to make absolutely sure that I pay the balances in full each and every month no matter how large they are. This should never be a problem if the cash has been budgeted for my purchases and secured in the bank. I have always paid my full balances each month ever since my very first credit card and this is why I never pay interest charges.

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            Using Credit Cards with Rewards

            Most of my credit cards are of the “no annual fees” type, including one MasterCard on a separate account I keep at home as a spare in case I lose my wallet or incur any fraudulent charges. However, I do use a main Visa card which does have an annual fee because all purchases on that card reward me with airline frequent flyer points. For me, the annual fee is worth it since I do travel and I get enough points to redeem many free flights.

            You have to decide for yourself if you will charge enough purchases on credit each year without paying interest charges to warrant a credit card that rewards you with airline points (or other rewards). In my case, the answer is “yes” but that might not be the case for you.

            I occasionally use a MasterCard or American Express card on small purchases just to keep those accounts active. Also, I have been to the odd retailer that accepted only a certain type of credit card, so I find that having one from each major company is quite handy. Aside from my main Visa card which earns the airline points, the rest of my cards are of the “no annual fees” variety.

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            So this is how I use my credit cards without getting into any financial trouble with them. This strategy is recommended only if you are not in debt, of course. In fact, it is worth keeping in mind once you’re out of debt so that you can keep your credit cards active and treat them responsibly.

            What are your credit card usage strategies? Let me know in the comments — I’d love to hear what methods you use.

            Featured photo credit: Artem Bali via unsplash.com

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