When our daughter is at an appropriate age, we will add her as an authorized signer to a credit card. While that may seem like a scary undertaking, it’s a lot less scary than watching her learn about credit card debt the hard way.
Like anyone, we want the best for our child. We want her to be successful in school, we want her to be a hard worker, respectful to others and we want her to be happy and healthy. And just as importantly, we want her to know about money. We want her to understand how to earn it, how to save it, invest it and share it for the benefit of others.
And we won’t accomplish all that though conversations at the dinner table or on the way to soccer practice. Financial management is one of the most important skills parents can teach their children, but it’s not like learning how to recite the ABCs. These lessons take time, patience and take place in stages
Our daughter is only 10 months old, but it won’t be long until finance 101 begins in the Vanlandingham household. Trips to the grocery store will be learning experiences as we add up what’s in the cart and count out what we owe at the check-out stand. There are also games, apps, books and other resources available, so parents can choose what works for them, and lines up with their values and goals.
In addition to games, there will be allowances, pay checks and checking accounts. As she grows, she’ll hone her financial literacy skills first-hand, earning money by doing chores at home or working part-time jobs. Like most kids, she’ll have no problem spending her money, but we will also teach her how to save it, invest it and share it.
Later, we will open a custodial Roth IRA for her, so she can learn the benefits of saving and investing for the future and know that it’s never too soon to start. Imagine how great it would be to learn that lesson early, and then have access to hundreds of thousands of tax-free dollars upon retirement later in life.
In our home, money is a family affair. We don’t hide it. We discuss it and our daughter will be involved in those conversations. She’ll learn the value of money and she’ll learn the importance of budgeting. And, because she’ll be part of the discussions, she’ll know things like family vacations don’t just happen. She’ll learn that you plan ahead for big expenses and save your money, so you’ll have what you need when time comes for the big purchase.
Financial management is an area full of lessons that teach young people responsibility in very tangible ways. Which brings us back to that credit card account that our daughter will be using before college.
Through that experience, she’ll know about credit, she’ll understand how credit ratings work, and she’ll know to walk away when she sees someone at the student union offering free t-shirts in exchange for credit card applications.
When that happens, she’ll have taken another step forward in her life-long journey toward financial prosperity, and that’s an accomplishment any parent can be proud of.