If you’re reading this, I assume you’re either a kid or a soon-to-be kid. And if you’re a parent, then it’s either your children or your extended family that have taken up residence in your house. So let’s put aside our differences and focus on how to make money online as a kid.
The Bad Habits You Need to Break
No parent wants to see their child become a grownup who relies on others for financial support, but let’s be real here — this is the case for most kids. Sure, some will grow up to be great contributors but many will gravitate to unhealthy habits that keep them dependent on money or attention from outside sources. These are the bad habits you need to break if you want to become financially independent as a kid.
Here are just some of the things your children need to avoid to ensure they do not grow up to be financial drains on your wallet:
Don’t Underestimate The Power Of Compounding
One of the best things you can teach your children is how to reinvest and compound their money. You may have heard of the power of compounding, which is the idea that interest and dividend income increase over time due to the increasing amounts of money you put in. So if you want your children to become independent and creative contributors, you need to make sure they understand the value of saving and how to build up their assets. You should also discuss with them why it is a good idea to keep some of their revenue and not rush into spending it on frivolous things. Setting up a regular savings account with a financial institution is a great idea, and for younger children, it may be wise to set up an online savings account so they can easily track their earnings and savings.
Avoid Bad Friendships
You know what they say – money can’t buy happiness, but it can prevent you from feeling its effects. Believe it or not, your friends’ company and your friends’ financial troubles can make you feel poorer even if you have plenty of money. The same goes for your acquaintances’ success. It’s all about perspective. Your friends may very well be your true friends, but if they aren’t financially responsible, what’s the point? You’re better off avoiding them.
If you want to teach your children to be independent and smart consumers, then you need to keep an eye out for signs of trouble when it comes to their personal financial affairs. Look for signs of bad habit such as credit card spending and addiction to gambling. If you find any of these issues, then it may be best to have a long talk with your kids about money and consequences.
Avoid Unnecessary Spending
When your kids are young, they don’t understand the concept of household spending limits, especially when it comes to buying their friends’ products. They will believe that whatever they want is available for them to purchase, and while this might be true in some cases, it can also create unnecessary financial stress. So instead of using your credit card to purchase your kids’ entertainment, take them to the store yourself and buy what they want to see in person. This will help teach them the value of money and will keep them from becoming burdensome freeloaders once they become teens.
Learn How To Manage Your Money
You’re not doing your children any favors by denying them opportunities to learn how to manage their finances. While it’s great that you want your children to become independent adults, this does not mean you need to shelter them from financial reality. Let them see how money is earned and how it is managed. Give them a small amount of money to manage and show them how to responsibly spend it. By doing so, you will not only be helping them prepare for adulthood, but you may also be teaching them to be more ethical and responsible consumers who understand the value of money.
If you want your children to be independent and productive adults, then you need to allow them to participate in financial decisions that affect them. This does not mean they need to be responsible for every penny they spend, but it does mean they need to have the knowledge to understand the basic principles of personal finance. If you want to prepare them for adulthood, then providing them with the basic financial literacy is a great place to start.
Create A Financial Plan
If you want to be prepared for the future, then you need to develop a financial plan. This means taking a look at your current situation and setting some long- and short-term financial goals. One of the best things you can do for your children is to develop a financial plan that will help them become independent and financially successful adults. This can mean anything from setting up a college fund to saving for a down payment on a house. Whatever it may be, get creative and develop a plan that works for you. If you want to be prepared for the future, then creating a financial plan is a great place to start.
Establish A Savings Policy
There are many benefits to establishing a savings policy, whether it’s a savings account for college, a rainy day fund, or an allowance for saving. Setting a money policy and sticking to it is a great way to guide your children toward financial responsibility. Establishing a savings policy doesn’t mean you need to be rigid about how your children spend their money, but it does mean you have their best interest at heart when it comes to saving. Keep the above tips in mind, and you will be able to establish a savings policy that will make a difference in your children’s lives.
Reward Good Behavior
Whether you’ve been badmouthing capitalism all your life or are just starting to chip in now, it’s important to acknowledge that not all capitalist systems are bad. In fact, there are many ethical, lawful, and beneficial forms of capitalism. One of the best things you can do for your children is to show them how to behave ethically and lawfully while gaining success in a capitalist society. One way to do this is to reward good behavior and punish bad behavior. Setting up some sort of allowance or bonus system for your children based on how they behave with their money could be a great way to show them the value of money and the consequences of their actions. This could mean giving them a small gift when they earn $25, or it could mean giving them some freedom to spend their money as they see fit. It’s up to you!
Above all else, remember to be a role model for your children. Set the example of what a responsible, hardworking, and ethical person looks like. Show them by doing, not telling, and setting a good example will help guide them toward adulthood.