It is not early to set your children on a path to financial success. One way to do this is by teaching them how to manage money early on. These life lessons can be invaluable as they grow up. Financial literacy is an important topic, but it’s not always taught in school. So, it is up to you as a parent to instill good spending habits in your child when they are young. When they start early, they can afford to make mistake and they will learn from it. It is better for them to make small mistakes now than when they are older and the financial stakes are higher. This article will show you how to help your children become more financially savvy.
Give them an allowance
Giving your child money to tackle everyday household chores is a dated idea. You shouldn’t have to reward your children with financial incentives just for doing things that are expected of them in the house. However, you can consider giving them allowance for doing work that goes beyond their regular chores. These are for chores that reflects their willingness to earn, like cleaning out the garage or taking care of siblings. Most children always love a game. So, why not challenge them to save a certain amount each month for the chance to earn a bonus.
Teach them what it means to pay themselves first
One of the ways to build wealth is to ensure your expenses are lower than your incomes. One way to have this is to always separate something from every pay check into a saving account. I call this paying yourself first. So, from every allowance you give them, encourage them to separate at least 10% into a saving account. Once they master this act, you can show them how to multiply the money. This is one way to help your children become more financially savvy.
Show genuine interest in their purchases
Give your child some guidance around saving to reinforce good habits. In addition, ask them what they want to purchase, then help them figure out how much it costs and how long it might take them to earn enough money. You can set up a schedule to help them keep track of their savings goals.
Help them understand the difference between needs and wants
Help your children understand the difference between things they need and things they want. They may want the latest cell phone but if it is completely out of their price range. So, encourage them to consider a different version. Most likely, they don’t need all the added features, they just need it to work. It is important to help them set realistic limits they can stick to. This will be a great lesson they will be grateful for when they grow up.
Develop their understanding of value
There are other things to consider besides price when making a purchase. Some things cost more because they are better quality and designed to last longer. They could buy the $10 shirt all their friends are wearing that falls apart after a few washes or, spend a little more and get something that will last them for years. At the same time, maybe the “no name” cookies are a better value because they are cheaper but just as good as some of the brand name treats. Improving their skills to identify value is all part of the financial literacy learning process.
Teach them the importance of patience
We live in a world that is all about instant gratification. I call this “the microwave generation”. But when it comes to building wealth, patience is key. When your children discovers that what they could have later could be more valuable than what they can get now, they gain the ability to understand the connection between time and money. In the long run, this will help your child in any future career as they begin to determine how much their time is worth, especially when balancing work and personal life.
As your children becomes more independent, they will take those healthy financial habits you have taught them wherever they go.
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Featured post image credit: Dave Ramsey