Ideally, one’s financial literacy should have its roots at home. However, the majority of parents are either not willing or are ill-equipped to deliver money lessons to their kids.
As the world continues to change, the need for learning financial literacy at an early age has never been more important. If you learned the hard way, it does not mean that your child should go through the same. Teaching children about money while they are still young will give them a better chance of making smarter financial decisions in the future thereby enhancing their chances of success.
While a typical child’s money habits usually start to manifest at around the age of 7, you can maneuver them into the right path by starting to teach them basic financial concepts such as saving and spending while they are as young as three years old.
You must remember that, as a parent, you are the biggest influence on your child’s behaviors, their financial habits notwithstanding. As such, if you want to help raise a generation of financial savvy and mindful consumers and investors, you not only need to teach them how money works but also how to spend it wisely.
Tips on How to Teach Your Kids about Money
1. Be an Example
You find it cute when the child tries to mimic mom or dad. However, this is not limited to just how you walk or talk, those little eyes are observing and taking in every little thing you do. As such, if you are constantly splurging money in front of them, they are likely not going to give it a lot of respect themselves.
The best way is to deliberately display good habits such as creating a budget for whatever purpose right in front of them. Discuss how you are going to use the money and what needs to be left out. This way, they see that money is a serious topic that needs to be approached with respect.
2. Teach them about Earning
One of the best ways of teaching kids about the value of money is by making them earn their allowances. You should not give them cash just because they are alive. This contributes to entitlement. Instead, allow them to put their sweat into it.
Playtime is one of the most valuable things to a kid. Thus, by asking them to sacrifice some of that time and do some extra chores around the house so they can be able to buy that toy they are asking for, they will realize that money is valuable.
Moreover, give them a commission on each chore they do around the house. The benefits of this is that they will be more responsible in addition to understanding at an early age that money is earned.Related: 10 Investment Lessons from Warren Buffett
3. Teaching about Delayed Gratification
Delayed gratification is an effective way of combating the ‘buy now, pay later’ mentality that afflicts most young adults leaving many in credit card debt. To teach this, you have to reinforce the idea that waiting usually pays off.
4. Teaching Against Impulse Buying
Impulse buying is another bad financial habit that affects most young adults. Teach your child early against it by always creating a budget before you go shopping. Start by outlining everything you are going to buy, the stores you will look into, and the price range for each item.
Go online and compare prices from the different stores and clip the coupons together. Give some of the savings you will make from these efforts so they can appreciate the value of bargain-hunting. This process will let them know that planning a purchase is better than impulse buying.
5. Sticking to Your Budget
Even after teaching them the value of earning money and creating a budget, a child may still make the mistake of spending all of their allowances on a single item and having nothing left for other things. This presents a teaching lesson as you will not give in to their demands that you give them more money. This will let them know the consequences of overspending. They are likely going to be more careful about how they use their money next time round.
6. Teach the Value of Saving
You obviously get your child toys or dolls regularly. However, when there is one that they really want, use that opportunity as a teaching aid. Set up a process for saving money in a bank account or piggy bank and tell them to save up the money they make from doing their chores. Some toys might be too expensive, and you might have to chip in from your pocket, but this should only be after seeing that they have put a lot of effort into saving.Related: Here’s How to Plan for Real Life WITH Kids!
7. Keep Track
One of the most important money management skills is knowing where your money is going. As such, have them use a notebook to detail their expenditure. Moreover, give them a file where they can store their receipts and statements. You can then,together, go through these records periodically and discuss where they could have done better while commending them on where they made good decisions.
Money management is one of the key pillars of life management. And because success is usually a result of good habits compounded over a long period, it is essential to teach your kids about money while they are still young. Use this article as a guide to offer them the best chances of success in the future.