Do you ever find yourself wishing your parents had taught you more about managing your money, or there had been lessons at school? Having the right financial skills in your arsenal for life is very important, and even now it’s not something that gets taught at school.
However, from your own life experiences, you are in a great situation to give your kids such skills. You’ll also help yourself in the bargain. Not too many years ago, during the mortgage crisis of 2007, millions of people lost their homes, and are even now still trying to recover. Many young people enter adulthood with student loans around their necks. It’s your duty as a parent to give your children the knowledge they need to avoid the mistakes of past generations and enable them to live financially fit lives. Children are never too young to grasp the important concepts of managing money, and here are some tips to help you provide the best financial lessons possible.
Introduce Your Kids to Money Early
Research has shown that by the age of seven, an adult’s money habits are set. It means you’ve got to get in early if you want to make a difference. However, any lessons you give have to be age appropriate, and that doesn’t just mean simpler. As soon as your child is able to count, they can be introduced to money, and the subject can be discussed around them. Timing is everything and a good time to introduce the idea of saving vs. spending is when they’re about to receive money as a gift, for example, a birthday.
There are a variety of different games you can play around money. Why not open a play restaurant or shop and let them buy the food they want to eat with pretend money? Help them make their own pretend money by creating money rubbings using paper and crayons.
Teach Them That Sometimes We Have to Wait for What We Want
This can be a hard concept to grasp when you’re fifteen, twenty-five or even fifty. Understanding gratification sometimes has to be delayed is, therefore, an important lesson to learn early on and will set the tone for the future. Children as young as 3 need to learn about saving for something they want to buy. They should also understand that just because you’re in a store, it doesn’t automatically mean you’re there to buy something for them. Understanding needs versus wants also helps you learn more about money. Of course, they are going to want the latest gadget. However, such just-for-fun purchases should be kept to a minimum. Don’t be embarrassed or ashamed to say no every now and again. Try not to use the excuse that you can’t afford it. Instead, explain to them that you’ll need to save up to make such a purchase and how long it will take. Or simply tell them that you’ve decided not to spend your money on such items.
Saving is a Good Habit to Teach
When your children are young, you can encourage them to save for short-term goals, and as they get older, the goals can become long-term ones instead. When they’re older, you can also explain about earning interest. Consider introducing an allowance or pocket money into the equation. You could give them a set amount of money each week or provide them with the opportunity to earn money doing chores. There are very differing opinions about which is best, so it’ll be something you can decide for yourself. Whatever you decide, the most important thing is to be consistent. If they’ve spent their allowance by Wednesday, for example, don’t be tempted to give them more. In real life, there are ways to get more money, such as taking out a loan, but you want to encourage your children to appreciate that when it’s gone, it’s gone. Next time, they may think twice about a purchase.
Help Them Understand That Money Can Have Different Roles
It’s vital for children to understand that money has many different roles, and it’s not just for spending. It can also be used to save for something tomorrow or be used for donating. If you’ve decided to give your child pocket money, give it to them in small denominations so they can decide to use it in different ways. Provide them with three different savings jars or piggy banks and encourage them to put money in them all. If they get given money for doing chores or are given it as a gift, get them to divide it equally between all the jars. For older children, opening different bank accounts works just as well. On the subject of banks, take your children with you when you go to the bank, so they can understand this is where you keep your money and where you save. Introduce them to the idea of using a debit card and how you can borrow money by using a credit card, but stress that it has to be paid back.
The best way to teach your children about money is to lead by example, give them some responsibility and involve them in many of the financial decisions you make. There are going to be some details they don’t need to worry about, but it is important they become involved whenever possible. Allow them to make decisions about their own savings and what they’re going to spend their money on. As well as introducing them to the idea of saving, you should also explain simple record keeping. When you’re out shopping, leave your credit cards at home and always pay in cash. These might seem like really simple measures, but you’ll be surprised at how effective they can be. It won’t be long before your kids take on board the lessons you’re teaching them and be able to handle money responsibly. If there is one skill that really should be taught in school, it should be this one. However, for the time being, such lessons can be taught at home.