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5 Practical Money Skills Your Kids Should Know
March 3, 2017
It has come to my attention that many children do not understand how to manage money. I am including teeangers and young 20s as “children” in this post. My daughter is in her senior year of high school and asked why she has not had a math class to “prepare her for the real world” and I did not have a good answer for that question. Algebra...check. Geometry...check. Algebra II… check. Pre-calculus...check. Statistics...almost check (she is still in school). She was upset that school does not teach “practical math.”
What is troubling to realize is that they do not teach practical math in school and many parents overlook the basic money management skills their children need to have before they are on their own.
#1 How to Write a Check
Now, I know many of us either never write checks or rarely write checks, but we know the basic skill of writing a check. It amazes me how many kids honestly do not know to write a check! To write a check, fill in the current date on the line in the upper right corner, the name of the recipient in the "Pay to" field of the check, the numerical amount next to the dollar sign ($), and then written form of the same amount on the line beneath; sign the check on the bottom right line. You should also consider adding a "memo" about the check's purpose on the lower left line. The memo should have at account number (or some pertinent information) regarding of the account in which you are paying so the payee can locate your account and appropriately apply the payment.
#2 How to Balance a Checkbook
I know that we are now able to check our bank account online which allows us to keep track of money daily, but mistakes are still made sometimes. How are you going to find those mistakes if you don’t write them down? It is important to balance your checkbook and keep track of checks, charges and credits that have not cleared your bank. Balancing your checkbook and keeping track of you spending helps prevent overdrawing your account. Just checking your balance online, does not qualify as balancing your checkbook. In order to balance your checkbook, you need to record all of your transactions (debits and credits) and compare that to your bank statement to reconcile your account.
#3 How to Pay Bills
Paying bills is primarily about organization. You need to keep track of the bills as you receive them, the payments you make, the dates in which the payments are due to avoid late fees or delinquencies, and any balance due after the payment has been applied. You also must make sure you have enough money to pay all of your bills. I know that seems obvious, but spending your paycheck before paying your bills can put you at risk for not having enough money to cover your bills.
#4 How to Create A Budget
I know many adults don’t know how to create a budget let alone teach their kids, but it is an extremely important money management skill. Creating a budget requires tracking your expenditures, setting goals, planning your finances, and disciplining yourself to stay on track. You also need to adapt as your expenses or income changes. You need to plan for unexpected expenses, prepare for the future, and determine the difference between needs and wants. This is no easy task, but a good budget can keep you on track to achieving your financial goals.
#5 How to Prepare Taxes
I know that most adults have their taxes prepared by an accountant which is the best way to go. The tax laws, rules and regulations are ever-changing and most adults’ tax preparation is too complicated and best handled by professionals. However, everyone should have the ability to file a basic 1040EZ. It is the simplest IRS tax form.
As your taxes become more complicated, you must also be aware of all of the financial documents you must keep track of to receive all of the deduction you are entitled to receive. The best way to understand what you will need at tax time is to meet with an accountant to discuss your situation so he/she can advise you on what documentation you will need.
Parents need to realize the importance of teaching money management skills to their children. Many schools do not teach these basic skills and kids are not aware of how to manage their money. This is a lifelong skill they need like reading or manners, they need to be taught at least the basics.