Why you should teach your child about paying with plastic?

When you think about what to teach your kids about money, chances are that credit cards aren’t high on your list of necessary lessons. In fact, many parents would just as soon not teach their kids about paying with plastic. However, well-intentioned that approach might be, the reality is that your child probably needs to know how to interact with plastic if he or she is going to grow up to be able to handle money appropriately.

Help your child understand debit and credit

You don’t need to encourage your child to use credit cards and get into debt in order to help him or her understand the appropriate use of plastic. It’s a good idea to approach the subject, though, and let your children know that there is a difference between debit and credit, and that they should avoid debt. Introducing them to plastic during their teen years can help them prepare for a world that increasingly does not make use of cash or check.
Talk about the difference between debit and credit. When you swipe the card, it comes from money you already have. Also talk about how credit is different; it’s a loan. You are using money you might not have. In either case, the important thing is to encourage your child to keep track of what he or she spends using plastic, and encourage your child only to spend money he or she already has.
                        

Learning to manage plastic

If you can get your child a debit card attached to a joint checking account, you can begin to help him or her learn to track his or her spending while using plastic. Because spending with plastic (whether it’s debit or credit) tends to encourage less mindfulness, getting your child in the habit of tracking spending is a big step forward.
In some states, you can get a debit card for your child when he or she is 16 years old, as long as it is for a joint account. Other states and banks, though, may not let minors get debit cards. If this is the case, a prepaid debit card isn’t a completely terrible idea. Look for a card that doesn’t charge outrageous fees. 
When your child uses any sort of plastic, make sure that he or she records what is being spent. You can use pen and paper, or you can use personal finance software on the computer. I’ve already got an account set up for my son in our personal finance software so he can see where he stands, and keep track of where his money is going.
Plastic (or, more likely, payment via cell phone) is the wave of the future. Teaching your children to manage their money in a world where they aren’t likely to count out cash is an important skill. That way, they can learn to pay attention to spending, and avoid the pitfalls of plastic later.

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Source: Secondary

How to figure out the best budget for you

One of the pitfalls of personal finance is that it’s easy to get caught up in the idea that there is a “right” way to do things. This can spill into budgeting, even though the way you budget is likely to be as personal as any other aspect of your life.

Before you decide what budgeting strategy is likely to work best for you, think about your relationship with money so that you can get a feel for what will help you stay on track.

Understanding your money personality

In the last few years, there have been many experts labeling money personalities based on some of the habits that characterize consumers’ spending. Here are some recommended different budgeting strategies based on the way you interact with money:

1. Spender: “This is someone who has enough money, but likes to make big purchases,” . Rather than getting caught up in nickels and dimes, the spender might budget according to percentages. Setting up a system where 20% might go to savings, 30% might go to housing, and so on, depending on priorities and preferences.

2. Saver: A person , which focuses on control over money. “The saver might use a detailed Excel spreadsheet to keep track of accounts daily.” The saver is always watching the spending and looking for ways to cut costs.

3. Shopper: “This is someone who spends emotionally and might be in debt,”. “The best type of budget for them might be an envelope budget.” When the money is gone, it’s gone. An envelope budget forces you to pay attention each time you spend, since it is usually a cash-based system.

4. Planner: When you’re a planner, you see your money as a means to your end goals. You look ahead, directing your resources to where they will do the most good to help you in your lifestyle now and later. 

5. Investor: “An investor is usually very money savvy,”  “They might not even need a budget, or they could use a combination of the aforementioned methods to stay on top of things.” The investor uses money to make money, and often plans ahead, incorporating earnings from interest and investment returns into the plan.

Sticking to your budget

There’s nothing wrong with experimenting a little bit with your budget to see which strategy most appeals to you. At the very least, it’s important to have some way of ensuring that you don’t spend more than you earn each month.

One of the problems with sticking to a budget, is that many people don’t acknowledge the realities associated with their money habits. “Once you figure out your money personality, the best thing to do is accept it,” . “If you know you are a shopper, you are aware that sometimes you spend on things you don’t need.”

Just being aware of that can help you place safeguards in place with your budget. Before you rush into budgeting, take the time to review what matters to you. Track your spending for a month or two so you can identify your major spending categories — or even discover money leaks that you would like to plug.

Once you’ve done that, you can figure out your money personality, and even consider changing it if you aren’t happy.“Fortunately, if someone isn’t happy with their personal money style, it just takes a little self-awareness and perhaps a good budgeting method to turn it all around.”


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