As a parent, one of your many roles is to prepare your children to be successful in the next phases of their life. Knowing how to manage money is a fundamental skill – and it’s never too soon for them to start learning. Here are some things you can do to ensure that they develop an approach to money that will serve them well throughout their entire life.
- Make talking about money a daily habit
Even as kids, they’ll be making frequent financial decisions. Spend or save? Hoard or share? So explaining in simple terms, the choices you make, and why, can build their understanding and help them make the right choices. For example, at the supermarket, compare the prices of different foods. With a limited budget, which would they choose? Candies to enjoy now? Then nothing for dinner? While they may choose short-term satisfaction, they’ll start to understand the implications.
- Model good financial behavior
Letting your kids understand that bills come in monthly and need to be paid on time, is also a good way to help them understand that it costs to live. Internet, electricity, water, the car – all need part of the monthly household income. Model good behavior by prioritizing these essential payments and letting them know when the sum required goes up or down.
- Keep it fun
Don’t let your discussions about money become too heavy or cause worry for your kids. Many money apps for kids such as MoneyInstructor.com have games and resources for teaching kids about money, managing allowances, and savings. For older kids and teenagers there are activities related to making money and starting a business. So when you have a budding entrepreneur in the family, it’s a great way to get them starting on the right foot,
- Encourage savings
We often underestimate the amount of cash our kids receive for holidays, birthdays, etc. While their first instinct is often to spend everything on something they want – today, you can help them develop a saving habit. With teenagers, for example, offer to match everything they save, and let them see the different that interest can make. Try to negotiate a balance between spending and saving, so they learn to enjoy the benefits of both.
- Provide a fixed allowance
Giving your child an allowance gives them the chance to make choices and to experience the implications. Make sure that you set clear rules for the allowance. If it’s tied to chores, those chores have to be done. Once the money has been spent –that’s it – they have to wait for the next ‘payment’ date to access more cash. On no account offer an advance – that’s only teaching them to borrow.
- Discuss their choices
While you want to allow them an appropriate level of financial independence so they’ll gain experience of handling their money, use their choices to help them draw lessons from their behavior. They’ll most likely make mistakes (which you’ll have seen coming), but these can provide some of the most valuable lessons. Just discussing positively – by asking the question ‘So what will you do differently next time?’ can help to prepare them to avoid repeating the same behavior.