Teaching children about wealth can be a very difficult thing. Many times, children do not understand financial terms, let alone certain financial products and investments that are available. Therefore, teaching a child about debt and wealth management can take some time and may include some trial and error. I say that it will include some trial and error because a child may subsequently (later on in life that is) partake in an investment that you did not educate them on or of which you warned them was risky. As a result, the child may lose some money. However, this is part of the learning process and if you taught that child well, this little investment blip will not repeat itself.
The biggest problem that parents have about teaching children about debt is that the parent categorizes all debt the same; that is the parent categorizes all debt as bad. The problem with this is that there are two types of debt (good debt and bad debt), and debt can be used and should be used to make money.
The debt traps that you need to teach your children about are the various debt traps that can occur as a result of credit card misuse. Credit cards contain many pitfalls. Therefore, it is your responsibility to teach your child how to avoid these pitfalls and how to take advantage of the powerful financial tool that is a credit card. Proper credit card use can open many financial doors and can create easier loan processes for your child. Start teaching them young so that your lessons reside in their memory and prevent your child from making many mistakes.
Wealth management is the overarching concept that you need to teach you children. Wealth management encompasses many different facets of the financial world. Bad debt avoidance is one of those categories. However, there is so much more that a child needs to be taught including, but not limited to, basic banking (which encompasses proper checking account management), savings strategies, stock market basics (including how to read and interpret stock information and financial information including the balance sheet, statement of cash flow, and income statement), and retirement planning. Giving your child the gift of all of this education will greatly enhance his/her chances of becoming wealthy and having a successful life.
Educate your children from an early age, teach them about everything you know, and help your children implement a financial strategy. By doing these things, your child will have a major financial advantage over many people.