Whether you’re a parent, or an aspiring parent, it is your responsibility to raise your children to be successful contributors to the society. One of the ways to achieve this is by teaching them personal finance. Ideally, every parent should start imbibing the right money principles as soon as the kids develop cognitive abilities. Children should learn about how to earn money, save money and spend wisely.
The reason why many adults don’t have their finances under control is because they weren’t taught by their parents. We have a chance to do better for the next generation by teaching them early. In commemoration of International youth day (August 12th), we would like to share useful tips on how to teach personal finance to your children.
- Lead by Example : It is common knowledge that children do what you do, not what you say. Therefore it is important that you show them how you handle your finances. Let them watch you while you work on your monthly budget, pay bills and save.
- Differentiate between wants and needs : A fundamental lesson in personal finance is knowing the difference between wants and needs. This knowledge is important because it informs your spending habit. You don’t want to raise adults who think that buying an expensive car is more important than buying a house.
- Allow them to Earn Money: It is important that children understand the value of money, and they can never truly understand the value till they work for it. So instead of just giving them allowances, make them do chores to earn the money. They could also get summer jobs and internships as soon as they are old enough. The chances of reckless spending is less when they work hard to earn their money.
- Teach Them To Monitor Their Spending : Let them learn how to be financially responsible by writing down how they spent their money. This is the first step in mastering how to create a budget and sticking to it.
- Define Savings Goals: It is easier for kids to save when they have a goal in mind. It could be a video game, new clothes or a new pair of shoes. Encourage your kids to save towards the things they want. This will teach them the importance of saving and delayed gratification.
- Provide An Avenue to Save: If you’re going to teach your child to save then you need to provide a place for them to keep the money. At the early stages, piggy banks are sufficient, but as soon as they are old enough, they should have self-managed savings accounts. The Crowdyvest App is also a fantastic way for your kids to save.
- Motivate them with Savings Incentives: Truth be told, saving money is usually the last thing on a child’s mind, but you can make it interesting by offering incentives. For instance, you could promise to double whatever amount they are able to save over a certain period of time. The thought of doubling their money is guaranteed to get them excited about saving.
- Forgive their mistakes: One of the best ways people learn is from their own mistakes therefore don’t be too hard on them when they make money mistakes. Your job is to ensure that they learn from such mistakes and avoid them in the future.
- Give them loans : When they need money for big purchases like a phone or a car, you could lend them the money and ensure that they pay back with interest (Yes, with interest!). This will teach them the concept of debt repayment and also emphasise that saving for a financial obligation is cheaper than taking a loan to fund it.
- Talk about Investments: Like we said earlier, the thought doubling your money will excite anybody, even kids! Educate your children about how to grow their savings through different investment options.