Every parent wants their kids to enjoy healthy financial futures, yet, it’s easy to forget being smart with money isn’t necessarily taught at school and it’s up to you to provide them with a realistic understanding. Without basic knowledge of spending, saving and how to live modestly it can be easy to make bad financial decisions, especially when kids have their own financial freedom. That’s why it’s so important to teach them smart money habits sooner rather than later so your child can be financially savvy in the future. It’s an invaluable gift that’ll stay with them forever!
There are so many reasons why it’s important to help your children understand basic money principles. Here’s just some of the benefits.
· Be able to make better financial decisions when they get older
· Are more business savvy in the future
· Understand basic money principles
· Have less debt and credit card spending
· Actively invest in their future
The more your talk about money with your kids and discuss how you make smart financial decisions, the better. Here’s how you can help raise children to be financially savvy.
Give your kids pocket money
A great way to start teaching your kids about money is by giving them a monthly allowance. This will help build their money awareness and also give them a small amount of financial freedom. If they want to spend their money as soon as they get it or save it, they’re able to make that decision themselves. Letting them have this control will mean they can learn from their mistakes, which is an important part of the process.
Teaching the concept of saving money and working towards a financial goal is a great lesson. Do this by getting your kids to save for something they want like a toy or a fun trip. Set up a money jar where it’s up to them how much or how little they put in from their allowance each month. Explain how it’s up to them how much they want to put towards their savings each month- they can put all of it or just half. Over time they can see how their savings build up, which can be very rewarding, especially when they reach their goal.
Explain needs vs. wants
Helping your kids understand the concept of needing something and wanting it will help them make smarter decisions with their money in the future. For example: explain to your child that you need to buy them new school clothes but you know they want a pair of trendy trainers. Chat with them about how you question whether items are necessary or just nice to have and how sometimes you have to make some sacrifices to stay within your budget. When your child next wants something, ask them if they think they need it or just want it. The more familiar they are with the difference between wanting and needing, the better they’ll be at judging what has greater value to them and what they can live without.
Involve your kids
Involving your kids in your own financial decisions will help them understand how to be financially savvy in real life situations. For example, if you’re planning on making a big purchase, show them how you research, compare products and prices so you can make an informed final choice. This will also help them realise being impulsive when spending money isn’t a good idea and weighing up all available options is the best course of action.
Teach about credit cards and budgeting
When your kids enter adulthood it’s likely they’ll be offered credit cards, free overdrafts and finance plans which can be very tempting and even seen as ‘free money’. It’s important to discuss how easy it can be to get into debt, what happens if you don’t pay and easy ways to budget the money they do have in their bank account. Having all this information to hand will mean they’ll be much more likely to be savvy with the money they do have and make sound decisions when it comes to credit cards and not getting into debt. After all, there is no such thing as ’free money’!
Set an example
Finally, most children learn through observation and even though we might not realise it, our kids are watching how we handle our own finances, which is why setting a good example is crucial. Easy ways to do this is spend less than you earn, pay bills on time, get rid of debt and work towards financial goals. Don’t be afraid to mention the reasons why you’re doing this to your kids so they can understand too. After all you can’t expect to teach them something you don’t practice yourself.