It is hard to navigate life without some important finance skills and it’s amazing that the education system doesn’t provide financial education to children.
Now is the time to rethink how we teach our kids about money. As parents, we need to put all the effort into helping our children understand how the financial system is working, but this effort should be supported by the school with some formal lessons about personal finance.
When growing up children should properly save, spend and budget their income in order the make the most out of it. We should start teaching kids about money when they are early age and not when they are almost adults with already built spending habits.
1.Even when they are early age kids should learn that money doesn’t grow on trees
Usually, when seeing bills popping out of the ATM kids are thinking that this is an infinite money well and when you need money you just have to walk to an ATM and ask for it.
They should be taught that the money inside the banking machine is a finite resource and this is a just machine that helps you retrieve the dollars from your account. An account fueled by work and not my magic.
2.Work with your budget
Kids will learn how to manage money if you give them some dollars to work with. Give them a weekly allowance and if the want a brand new toy which is too expensive to buy they have to work they way out by budgeting a few weeks. If they spend all their allowance in one shot they will learn the hard way that they won’t receive another cent until next week. This way they will start to become more responsible for their expenditure and won’t throw money out the window.
3.Combat the “buy now, pay later mentality”
We are all using credit cards which allow us to pay for our shopping, but the kids probably don’t know all the strings attached to this cards. They don’t know that money comes with a cost, an interest which all pay at the end of the month when we draw the bottom line.
You need to teach them about delayed gratification with examples in real life. You have to explain that waiting has its rewards and when you desperately need a brand new toy and you don’t have the entire amount of money it is better to wait and save than to borrow and spend.
Some discounts may occur if the waiting period is longer and usually they will buy the toy at a lower price, leaving some more money to spend after.
4.Don’t spend it as soon as you get it
The children always have an impulsive buying attitude and sometimes they can’t even imagine leaving the shop without the things they desire. But show them some examples. Before you even go shopping you should always create a budget. Let them participate at the budget so that they will hear the needs of the family and how much money you need to have in order to buy the entire shopping list.
Prioritize the items from your shopping list and outline what stores are you going to and the price range for every single item. Don’t be lazy and search online from some price comparison and some online coupons. Introduce the kids to saving and bargain-hunting.
5.Want versus need
All the kids “need” the latest lego toy and the latest games console, but as parents you should always make them understand what is the difference between needs and wants. This lesson will make your life easier and will help them to make sensible spending decisions everytime they are in a candy shop or a toy store.
As adults, we are always told no, whether it is from the bank or from our employers. The kids eventually will be turned down by the others so you have to prepare them for real life. You will have to say no to some of their wants in order to teach them some good financial lessons.
It’s ok to say no but don’t say you can’t afford it because this default answer will send a wrong message, that you are not in control of your money and this will create future anxieties for them.
You should say it in a more appropriate way “ We choose not to spend our money like that”
6.Teach the kids about the emotional highs and lows
Give them some money in a lower denomination in order to make it easier to allocate a fraction of their income to different goals or spendings.
Teach them the steps: First, they must save money, then to spend it, then experience the joy that comes from buying the toy they’ve dreamed about it. They will learn what is like to lose some money in the process but also this will empower the idea that it must then be saved again
7.Lead by example
The parents are the most influent persons for a child and they will follow every move you make and they will copy it. Be carefully what you are asking from your kid because you have to lead by example in order to make it happen.
If you have some bad spending habits probably your children will grow having them also. First, start by making you a finance savvy person before you teach your kid about it.