If you look back at your childhood and wish that someone should have taught you about money, then you know how hard it is to teach and train yourself about money and finances.
It is sad to note that in the present times, there are very many people who graduate from high school and college with very little knowledge or none at all on managing their money. While most people think that money lessons should be taught at school, it is worth noting that these lessons are life skills that should be taught at home right from a young age. Here are a few tips on how to teach your child about money.
1. Set an example
Mostly, children learn by watching what their parents are doing. If you spend your money anyhow and without any plan, they will definitely notice this and will most likely end up being careless spenders. To avert such likelihood, it is important to lead by example. Show your children to plan and budget for their money, spend on what is necessary, and save a portion of their money. As a parent, it is necessary to set a healthy and example as your children will probably follow in your footsteps.
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2. Use an envelope budgeting system
It is quite hard for children to understand complex approaches and strategies of planning for expenditures and saving money. As such, you should use simple approaches that your child will comprehend and understand easily. One such approach is the envelope budgeting system whereby you label an envelope according to what you want to purchase and then save for that item in the envelope. For instance, you can use this system with your child when he/she is saving for a toy or any other item that he/she likes.
3. Make a savings chart
After your child has identified what he/she wants to save for, you should make a savings chart for him/her to follow while saving. There are many ways how you can label the chart but the easiest is by drawing boxes to represent each week (or day) depending on how long he/she is saving for the item they want to buy. You can let your child use stickers to mark the days/weeks he has saved on the chart as this motivates them to save more upon seeing that they are closer to meeting their target.
4. Offer rewards for savings
Consider giving rewards to your child after he/she makes savings. This acts as a motivation to help him/her save more and develop interest in learning more about managing their money. The secret of successful money lessons in children is based on the fact that you should make these lessons lively and entertaining. This is bound to make it easy for them to develop interest in saving more as well as managing their money wisely.
5. Have a savings match with your child
A “savings match” is usually a great way of encouraging your child on saving extra money and realize the benefits of a having a savings account. Since there isn’t much that your child can save as the savings are dependent on the allowance you give them, you should be ready to match any savings they make. You can also consider increasing their allowances as a motivation for them to save more.
6. Let them learn from their mistakes
Sometimes, the best lessons in life are learnt the hard way; from poor decisions and mistakes. This is because the consequences and losses of these lessons are hard to forget. When your child is young, any financial losses they may suffer due to poor decision making may not be much but will teach them very good lessons. For instance, if your son gets his birthday and holiday allowances and wastes it on worthless items rather than the video game he has desired for long, he will wish he did not waste it. With this harsh lesson, he will definitely not waste a single cent next time but will instead spend it according to his plans.
7. Talk about money
It is very hard to teach someone about something he/she does not seem to understand. Due to this, it is necessary to talk to your child about money. While you may not want to discuss your salary with your kids, you should tell them the financial arrangements and plans you are making towards their future and your retirement. This makes it easy for them to understand that money lessons are lifelong lessons and skills as opposed to short term goals.
8. Teach them about wants and needs
Kids like having the finest things in life such as classic game consoles, flashy toys, and exclusive holiday vacations. These are called wants and are not necessary for survival but rather they are luxuries that you can comfortably live without. School, good medical care, healthy and balanced diets, and shelter are needs that you can’t live without. Let your children understand the difference between wants and needs so that they are able to know how to spend wisely. It is alright to say no to your child when they want to spend on wants and forego needs.
9. Avoid provoking future financial anxieties in your children
When teaching your child the importance of saving for the future, you should do it sparingly and in a well defined manner so that you do not make them anxious about their future. Despite the financial constraints that the family may be going through, avoid stressing on them too much such that the kids become fearful of the future. Instead, teach them how to be flexible to cope with the present times and adjust their savings and expenditure to cater for needs.
10. Teach them about the danger of relying on credit, loans and credit cards
You should teach your children that debts and loans are bad financial ideas right from when they are young. Principles on being financially independent are very important right from a young age to when the child enters into adulthood and gets employed or becomes a business person. Getting too much involved in debts and loans can potentially hinder your potential of becoming financially independent and self-reliant. These are important life lessons that your children should know right from a young age.
Teach your children on how to work for their income and also train them about giving and sharing with the less fortunate in the society. These life lessons are guaranteed to bring a balance in life and also enable them pass down the lessons to future generations.
Further reading:
https://www.moneycrashers.com/teaching-kids-save-money/
https://www.moneysmart.gov.au/life-events-and-you/families/teaching-kids-about-money
