Teaching Your Child about Money

3 Vital Steps to Prepare Your Child for the Financial Real World

Would you throw your teenager behind the wheel on the freeway without drivers training? So when it comes to teenagers and money, why are young adults moving out without practical financial training? Both results could be disastrous and haunt your child for years.

No matter your child's age it's never to early or late to teach them important lessons about handling their finances. Most parents are aware that schools don't teach their youth leadership skills, or practical financial matters and at the same time realize the how important financial education is for their children's future. In talking with parents there are three distinct parenting styles when it comes to educating their children about financial matters.

Parents that don't feel qualified to instruct their teenagers on money matters. These parents often put added stress on themselves especially when they see their children making the same financial mistakes that they made themselves. Often these parents feel responsible and just hope their teenagers will have a better handle on money.

Parents that have a good handle on their finances but have trouble teaching when it comes to their teenagers and money. Many parents have a general understanding of financial matters but don't know how to teach their children. They really don't understand how to break down important financial lessons in a way their child will follow. Plus young adults often respond better to a 3^rd party person teaching them rather than their own parents. You don't teach them chemistry or algebra so why would you teach them subjects as important as money and youth leadership skills.

Parents that believe in the school of hard knocks. Many teenagers and adults learned about money the hard way - make a mistake then try to fix it. They feel "I turned out OK guess it worked". That may be the case and sure your child could learn the hard way - but why. Use the resources available to break the 'school of hard knocks' way of learning so your child has the advantage you wish you had.

In today's world, every child needs a course on financial education so they can avoid the financial pitfalls so many people find themselves in. Below are three tips that will help you prepare your child for a professional financial education course.

• Lifestyle. Children, teenagers and young adults don't really care about money. It's what money brings them that motivates them learn. Once they understand that money gives them time, freedom and the ability to live the lifestyle that they want you'll find them excited to want to learn and develop youth leadership skills.

Relating money to lifestyle is a great opportunity to get to know your children better plus you'll be helping them to develop a healthy relationship with money. Get to know their dreams; and acknowledge them no matter how far fetched the may seem to you. If your 13 year old dreams one day taking a trip to outer space- encourage that. To connect your teenager and money, use that goal to motivate your teenager. Instead of teaching them to save money for no particular reason you can explain to them how money is an important part in their goal of going to outer space.

• Financial Accounts Why wait to open their savings, checking, retirement and brokerage account. It doesn't matter if they are in kindergarten or colleges get these account set up immediately.

Opening their financial accounts makes children and teenagers feel an added sense of responsibility for their financial future. This sense of responsibility is a vital part of preparing your child to live on their own.

Developing a relationship with a money organization early on is a benefit that will last your teenager a lifetime. The longer relationship you have established with a bank or brokerage company the more benefits your child may receive. In the future they may be able to qualify easier for loans, get better rates, and be offered additional services that newer clients don't receive.

• Invest. Encourage your teenager to begin investing in the stock market once they have money saved up. A word of caution do not go out and buy individual stocks or mutual funds those are to risky unless you have specialized investment training. Instead you may opt to invest in the overall market.

There are several investment vehicles available that allow you to invest in the overall market that are just as easy as buying a stock or mutual fund. By investing in the broad market your child may have lower risk, more consistent returns and greater diversification. The best part is this is simple to do. You can help them set up their investment account and automate it so each and every month the investment is made for them automatically.

Preparing your child for the financially challenging world of the 21^st century is an important part of responsible parenting. Developing these youth leadership skills and helping your teenager learn about money management will help them throughout their life. You would never give your child a car without drivers training; so make sure you give them financial training before they move out on their own.

Author of 'Financially Free by 30, Vince Shorb, teaches youth leadership and financial independence skills to high school and college age. Go to www.FreeBy30.com to get your free video report.