Teaching your kids about money
One of the most important lessons parents can teach their kids is about money - how to be financially responsible and knowledgeable about all things money-related. While you may think this is a daunting task, it can be done. Keep reading for some great information and tips on how to help your child grow up into a financially secure adult.
As parents, one of our responsibilities is to prepare our children to face the challenges of the real world – this includes teaching your kids about money and how to be financially savvy.
These days, many parents over-indulge their children. They shower their kids with toys, electronic gadgets and new clothes. But unknowingly, such parents may be doing their kids more harm than good. Why? Because in the real world, no amount of crying or tantrums will get us what we want. So children who do not understand this often grow up to be financially irresponsible adults.
Teaching your kids about money needn’t be complicated or difficult. Here are some great tips on how to teach your children to be financially responsible.
Start with yourself
We may teach our kids the best financial lessons in life, but it is our actions that speak louder. If we seem to be out working most of the time and still have nothing real to show for it (financial security, savings) then they’ll be programmed with that lopsided message.
Is your weekend “quality time” with your kids mostly spent in malls splurging on the latest gadgets or designer clothing? If your idea of bonding is centered around material goods, you are teaching them a very bad lesson and they may grow up thinking that healing emotional problems can be done by a trip to the mall.
Ensure your children understand that self-worth does not equate to wearing expensive clothes or possessing the latest gadgets or car. Teach them that intelligence, creativity, caring, integrity, ethics, etc. are the defining values that really measure a person’s real worth.
Value hard work, investment and sacrifice
Ever heard of the “marshmallow test?” This is a test where a child who loves marshmallows is given one. He’s told that he can eat it right away, or if he waits a little longer before eating it, another marshmallow will be added.
Do your kids understand the concept of self-restraint? Deferred gratification or delayed gratification is the person’s ability to wait in order to obtain something that one wants. Wikipedia says this personality trait or ability is important for life success. Instill in their minds the value of saving against spending.
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Introduce them to basic money management concepts
As soon as your kids can count, introduce them to money and how to count money by denomination. Teach your kids how to save and take responsibility for what they spend. Teach them that money is just a tool (but needs to be properly managed) and not the ultimate end. You can do all this by:
- Giving them an allowance – at first, just a couple of dollars per week or month. You can start with “spending money”—money they can spend on whatever they like (candies, marbles, etc.) This is a good first step to guide them on how they spend their money. You can eventually increase the allowance to include daily school fare and snacks. At first, you will be met with frustrating over-spending or un-allocated purchases. This is a good time to start instilling discipline. When applicable, do not bail them out if they get overdrawn because of irresponsible spending. It will be a good chance for them to appreciate consequences and to be more responsible in spending.
- Teaching them the difference between wants and needs – even adults make bad spending decisions because they forget to differentiate between what they really need and what they want. Show your kids how to do this through simple measures such as having a list when you go grocery shopping to avoid impulsive buying.
- Teach them about the value of savings – You may influence them to save a couple of cents per week and reward them by putting in an equal amount per money saved (this teaches them about interest).
- Teach them the value of earning – this could be one of the most important things you could teach your child. On top of their usual allowance, ask them to do some tasks that are outside of what they usually do at home for a fee. However, be careful lest your children forget about the value of working for the sake of helping without expecting anything.
- Warn them about debts – you could do this by talking to your kids about borrowing. Start of with a statement like “remember when you borrowed Ian’s toy car?” and discuss how borrowing in this case means returning the car. Next talk about borrowing something consumable, the aim being to move the discussion to the concept of repayment of the item by an identical or comparable item. Explore the idea of repaying something a little at a time. Once your child understands the need to repay an item that has been borrowed and used up, you can move on to defining debt. In this situation, the basic answer is that debt is when something that has been borrowed – typically money – needs to be returned.
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We hope you found this article useful. If you have any tips of your own about teaching kids about money, do share them by leaving a comment.