A good understanding of personal finance is one of the most valuable skills in life that any person can have, and it’s sad they don’t teach anything at school about this. I believe it’s never too early for you to involve your children with money, because nobody else is going to do it.
According to recent research, some primary school children are able to grasp intermediate financial concepts such as saving. This is really saying something, since it seems that many adults don’t.
Here are some clever money habits that you should teach your children.
Talk about money
Be open about money. As the parent, you’re going to have the biggest influence on their financial habits and ultimately on their financial future. You need to lead by example, by being financially responsible yourself and then letting the children see that.
Your children are really observant and you’ll be really surprised how much they notice. When you’ve been stressed out about money and you’re working yourself to the bone. Constantly talking to them about money, such as what’s going on in the national economy, or what’s going on financially in the family. I mean this can be really hard for a lot of parents to do because they don’t want to face it, much less tell their children.
You have got to do it on their terms, of course, so don’t bewilder them with complex business coaching or financial glossary terms, and don’t accidentally scare them to death however really bring them in on what’s going on with family money. If their birthday celebrations are going to have to be tight this year, just help your children to understand why that is. This will definitely ease their worries of seeing you stressed, and it will teach them lifelong money lessons.
You should educate them on how much things cost, for example hot water, which costs more than cold water, and showing them the household bills. Let them know where they can help save the family money, by doing some basic simple things like turning off the lights when they leave a room.
This was something my dad constantly brought up with us every day; turn the lights out, however it’s a clever money habit to install in kids.
Family shopping trips are probably your kids first and most frequent encounter with spending, so this is a great opportunity to teach them about money, especially smarter spending techniques.
For example, teach them the value of researching a product. They take a lot of that for granted; they just assume you know what you’re buying. Show them how you decided comparing products is awesome knowing when something is overpriced or underpriced or undervalued. Knowing when to purchase things because they are on sale, or balancing what your family wants versus what your family actually needs.
Perhaps even when they’re a little older, let them take charge of the shopping sometimes and encourage them to choose with their own decisions about the best products and the best value. Let them learn from any mistakes.
Lead by example
On the other hand, when you spend your credit card frivolously or you don’t contribute to your savings, they’re going to catch on to that also, and that is most likely going to mean they will be equally really irresponsible with their money when they’re older.
You have to lead by example so this is going to maybe motivate you a little bit to start taking control some things that you’ve been letting slide
Earn an allowance
Another clever money habit is to make your kids earn an allowance. This is awesome I know it’s easy to surrender to kind of like buying stuff that they want so they’ll stop asking you it don’t be quiet however be careful doing this you know waiting to buy something you want it’s probably the hardest lesson for any child to learn I might even say for any adult to learn and I am going to point the finger at me.
We’ve all grown up with a sort of money that doesn’t go on a tree mentality or at least many of us have and we should pass that on to our children to create a really good work ethic and an understanding of the value of money.
An obvious answer to figuring this out with them is putting them to work with household chores however you can also pay the children not just for the chores they’re doing, but for things like if they’re reading 30 minutes a day, or if they’re limiting their time online.
Your children will start to learn the value of money and maybe about the value of saving so whatever you do don’t just hand them an allowance. That’s going to teach them to be entitled. What you have to do is help them earn their allowance by showing them how money works.
Discipline of spending
You don’t even have to give them pocket money every single week. You could time it instead to be every two weeks or monthly and what that’s going to do is teach them the importance of discipline; spreading out the spending process and that they need to make their money last.
It’s a pretty big deal for a child to learn that and while you can teach them to spend their allowance wisely you can also let them make mistakes and waste their money on a toy game or clothes that they’re only going to use once or twice.
When they feel like they’ve wasted their money and you’ve talked to them about the value of buying things, which will be worth it. They will remember this for the future and they’ll recognize that they need to be smart about how they spend and save and invest their allowance.
How to save money
The next clever money habit is to show them how to save, spend and invest early. Most parents open a savings account as soon as their child is born, deposit the birthday money, assorted gift money, etc and build up a good financial base and set them up for a lifetime of clever money habits.
Some parents even continue to make monthly payments into their child’s savings account until old enough to take it over which is awesome however you should work to get them involved in the savings process as soon as they are old enough to understand.
The younger they are, when you instill the importance of budgeting and saving money, the better it is all the way around for you and for them. You must teach your child that they don’t have to always spend their money by encouraging them to put a portion of this money in.
Whether they earn their allowance or gift money or whatever they got it, put a portion of that toward long-term financial goals like University or an emergency fund, or get them buying shares at the end of the month.
You should let them see their monthly bank account statement to show how their hard work and self-control is paying off, and help motivate them to save more. The problem with that, of course, is if they’re not investing it or it’s going in the bank and it’s making a tiny interest rate.
It’s going to be pretty motivating to go buy the bike if you open up an investment account for them that will grow the money fast enough for it to make a difference, instead of that low-interest bank account.
Children can learn a lot more about the power of money and how financial markets work and understand the idea of picking individual companies that they like rather than using funds when they get older. You can even use online share trading games to give them a better understanding and practice without real money.
Get them to find wonderful businesses that they believe in. You know, brands or products that they use and enjoy now, and that will likely make them the most money in the longer term. This is a fantastic way to build clever money habits for life.
Part time work
When they become old enough, you should gently encourage them to get an after school job. I know this can be very hard for some of you, to actually insist that your children go to work, however it’s good for them. Depending on how old your child is, they can start experiencing work for pay outside the household by doing something as simple as mowing or washing cars in the neighborhood.
A part-time job can teach your child to be really thoughtful about how they spend their time. They’re going to start to realize that relationships with their family and their friends matter most, and that money doesn’t always buy happiness. They’re also going to find out that working for a tiny amount of money per hour is going to motivate them for that University degree.
Donate to charity
My last clever money habit to share in this article, is to really encourage them to give to something else outside themselves for a cause so much like how we rule one investors put our money into businesses we believe in and that have meaning to us. Encourage your children to give some of their money to charities or something that interests them, something that helps other people.
Giving charitably is a fantastic habit for you to teach your children. You can match their interests to their giving, for example if your child enjoys music, you could help them find a music related charity. If they instead love caring for animals, perhaps find an animal rescue shelter that they could donate to, or even better, they can do volunteering.
Community service for these causes also teaches them great lessons on giving donations and raising money for something greater than themselves, and is going to help make them humble and grateful and realize that money can be good for others too.