Today’s children are becoming more intelligent and engaged with the family’s financial life, actively participating in both the cash inflow and the cash outflow. However, issues such as online lending can now be even more complex and complicated for them.
If you want your son, daughter, or any other 8-year-old relative to understand the world of finance better, it is essential to also explain how lending works. For ease of understanding, we have separated some topics on how you could talk about it with the child in question.
Financial education begins at home, regardless of age or financial condition
Any family, however small their income, has a duty to teach their children about the use of money. Awareness through allowances or rewards for good behavior are some of the ways parents most often use, as their children can only actually work during adolescence.
Don’t be afraid to let children handle money, just orient and show them the right way for them to have their own financial experiences. In this way they will develop the ability to manage their income and expenses, even if they have access to only small amounts.
Also, always be a good example, they will refer to you until adulthood. You can be sure that your actions will positively (or negatively) influence children’s lives and can define an entire future with simple steps.
Explain to the child how money works in general.
Many children have a hard time understanding the value of money, and ask parents to buy everything that goes before their eyes. It is your responsibility to talk about money and its value, its operation. Remember that the child is not born knowing and you will be your financial reference until you grow up and live on your own.
Begin by explaining that money works as an exchange: you trade your time to get it, and then you exchange money for something you need, which may be related to your needs or desires. Have the child deal with money by giving her this opportunity through a grant. Encourage her to make money plans, from buying something immediate to long-term shopping.
Talk about money and credit card differences in practice
Tell the child what money is worth to society and what the card is worth to establishments and stores. Explain that the money in hand has already been earned, and the credit card money is the money of tomorrow, so it does not belong to the person yet, it is borrowed.
Talk about the use of the card and its usefulness in larger purchases, which allow for the full installment payment, and the opportunity to immediately buy something that would only be possible after a long time of waiting and work. Talk about the negatives and positives of using your credit card, and the consequences of not paying your card bill on time.
Make her aware of the importance of saving money not to get in trouble
Understanding the value of money must come at an early age, so that the child becomes a teenager and, consequently, a responsible and balanced adult. If the family can maintain financial health, they will be able to teach their children or relatives the best way to handle money.
And when you talk about it you can’t stop talking about saving, creating savings. We will not always receive the same amount and need to be prepared for any eventualities. You can exemplify to the child by failing to pay his allowance in assorted months, so he can save you from running out of money when you need it, and you don’t have to depend on you always to make progress in your finances.
Tell us how online lending works now, its advantages and disadvantages
Hiding this option will not prevent your child from ever applying for a loan. The point here is to show the positives and negatives of getting a loan and in which situations when borrowing a loan should be considered.
The child needs to understand that, just like the credit card, the money in a loan is money that does not belong to him or her, it is money lent, borrowed. In addition, she needs to understand that there are interest and terms that must be honored from the moment the contract is signed.
Otherwise, the ” punishment ” is applied. You can, for example, encourage her to borrow money from you, in addition to the money she receives in the form of an allowance, to buy something she really wants. You determine for her a repayment term of this money and the interest to be paid if she does not comply with the agreed.
Well, how easy is it to talk about finances with a child? You can give very playful examples, within the reality in which the child lives, just using the amount he receives from monthly allowance. Follow the child’s planning, understand what she spends, what she wants to buy and be there to always show the best way. But remember: nothing to interfere with the decisions the child makes.
She needs to live her own experiences to draw her own conclusions about the world of finance. Sometimes it is necessary to make mistakes or lose money so that thoughts get in the way and everything flows better. In the end, if all goes wrong, there is still a possibility to apply for a loan online now.