5 Financial lessons you need to teach your kids!
Everyone knows the saying ‘you can’t teach an old dog new tricks’.
Well, you can easily teach a young pup and equipping your kids with the knowledge on how to manage their money from a young age sets them up to have good habits for life.
If kids develop good financial skills from an early age they’ll be ready for the financial challenges of adulthood.
Giving your kids a good foundation and teaching them about money matters is critical for their personal development. Showing children the basics such as how to budget, spend and save will establish good money habits for life.
As a mother of 3 growing boys I thought I would share some of the tips that Phil and I are teaching our boys in relation to their finances. We have seen too many people come to us for advice in their 20’s and 30’s with no savings because they have never set a budget, spend more then they earn and have way too much personal debt.
5 Financial lessons you need to teach your kids!
Budgeting is one of the most universally misunderstood money concepts for children and adults. That’s why it’s so important to make sure a child understands why you should write down money priorities and keep track of whether those priorities are being met. When a child gets a little older, it might be a good idea to help them establish a budget for everyday expenses with an important side goal, such as accumulating spending money for a family holiday.
Involving your kids in discussions about your family budget is another way you can talk to your children about money. This helps give them the big picture about costs and spending. By explaining how much money your family has to spend every week and how this money is spent your kids will better understand the costs of family life and how much can be saved for other things.
If you have younger kids you can try to turn the budgeting process into a game. One example is to take a pile of fake money, give it to the child and ask them what they would spend it on. The child would write down each purpose – toys, school lunches and special things they need to save for – and get them to write down how they’d allocate the cash. This can turn into a real exercise later once they are old enough to spend real money with a plan.
- YOU NEED GOALS
Setting goals is the first step in turning the invisible into the visible. Tony Robbins
When a child sets a goal they’re excited to achieve, they’re more likely to take the steps necessary to reach that goal – as opposed to parents setting a goal they want their child to achieve. Start with short term goals and then start introducing medium and long term goals. Sit down with them and let them chose their goals and work on a plan together on how they can achieve the goal. You should also write the plan down with them and talk about it regularly.
Once your children are in their teenage years they may want to start saving for a car or their first property. Encourage them to get photos of their goals and put them up where they can see it. The sooner you start planning the sooner you will achieve your goals.
You should also celebrate success. Once they achieve their first goal reward them and encourage them to work on their next goal.
- TAKE THEM TO THE BANK
Similar to the idea of piggy-banking to show the physical aspect of money, taking them to the bank will leave an impression on just how important it is. Even sitting them next to you when doing any online banking helps. Open an account for your child and encourage them to deposit savings, birthday money and show them the account each month.
The ATM is a great place to start teaching kids about money. You could explain to your child that the ATM holds the money you have made by working hard and saving. It is not just a hole in the wall where money comes out. When you take money out of the ATM it is taken from your bank account and you’ll have less in your account to spend later.
- EARN MONEY FOR HARD WORK
Don’t give your kids pocket money on a weekly basis without working for it. Giving pocket money creates the opportunity to teach children about spending thoughtfully and saving – and even the consequences of misplacing money, losing it, betting or giving money away.
Regardless of the amount of money, giving pocket money to children as young as four or five years helps them to begin learning about money management.
Pocket money also helps teach children about having to make choices, saving up and waiting for things they want. Letting your children make a few mistakes – like spending all their hard-earned savings, originally earmarked for a hot-wheels car, on the latest gadget – is part of the learning process. But it’s OK to put limits on what they spend their money on.
- DON’T USE DEBT TO FUND YOUR LIFESTYLE
This is the most important lesson to ensure you teach your kids. These days borrowing money has become second nature. You can borrow money from a bank to buy a house or a car. Or you might use a credit card to pay for different living expenses. It’s important for children to understand the basics about borrowing money from an early age. The biggest lesson to teach kids about borrowing money is that it has to be paid back. Most often with interest on top.
A simple way to teach kids about borrowing is to use examples like borrowing a library book, a DVD from a store or a toy from a friend and then returning it. You can take older kids for a trip to the bank. Explain that a bank can lend you money to buy things now, but that you don’t get it for free because it costs you extra money – in the form of interest – to borrow money from the bank.
In summary it is all about starting early, setting a budget, having clear goals and working hard!
I hope you have found some tips to use with your children.
Have a sensational weekend!