Very few parents realize the importance of Money Smartness when raising their children.
Teaching financial principles and duties at a young age can help to avoid harmful financial traps and develop good money habits.
According to my own experience with my own family members and friends, as well as my customers, it is quite typical among young adults.
Even adults have reckless spending habits, a lack of money-saving discipline, and a general aversion to financial planning.
And it is quite difficult for people to undo this unhealthy attitude toward money and lack of money management skills as time passes… which may lead to unneeded stress, marital issues, property loss, inability to pay daily payments, and worry about the future.
Have you had similar fears about your family, particularly your children?
Are you concerned about your children’s ability to maintain themselves without your assistance?
Are you sure that your child will be financially savvy?
The solution is entirely dependent on you!
It would seem natural to assume that most individuals learn about money through their parents.
Not necessarily, I say! Although it is highly advantageous for a youngster to observe his or her parents handle money problems correctly.
There have been many situations when financially competent people were raised by financially catastrophic parents and vice versa!
That is why I feel it is critical for parents to lead by example and discuss money with their children.
Furthermore, I believe that giving money to children without showing them what to do with it may leave them with a lack of money knowledge and teach them incorrect values.
I believe you may begin to inculcate good money habits in children as early as kindergarten.
Make a saving graphic for children aged 3 to 6.
You would assume that teaching money values to a three-year-old child is pointless, but experts disagree.
The more money-related items you can “present” them, the more they will absorb. It is critical to be creative while educating kids to save. The trick is to make saving visible and tangible.
You may start by giving them a modest regular allowance, but only if you ask them what they want to do with the money and assist them in planning how to spend it.
Put the money in a piggy bank so kids may see it grow or spend it to buy anything.
That way, youngsters can begin to realize that money can bring them what they want.
This experience would help them lay the groundwork for more serious saving in the future.
Make it into a game: Use a transparent jar for saving and instruct your kid that she must fill the jar with her own money in order to receive a certain item.
Even better, as an incentive, place an image of the item on the jar. Every time your kid places her own money (ideally coins) in the jar, she can see her progress toward the “target.” The aim is to link the accumulation of money to the desired toy.
Ages 7 to 10: Trial and error is the best way to learn.
At this time, your children are learning what money can purchase and the worth of coins and notes. However, they still require images to assist them in saving.
So, propose that kids use several jars for different purposes and divide their allotment evenly: one for day-to-day shopping, another for “prize” things, and a third for charity.
Using these many jars would educate children about money management, goal setting, and the various things they can do with their money.
This would also be an excellent opportunity to learn about cost and to introduce the concept of having “enough money or waiting till you have it.”
Go shopping together and discuss how you don’t have enough money to buy some goods right now but will be able to buy them when you save more money.
Modeling a spending delay has a significant influence on youngsters.
Then let your child go through the experience of “not having enough money yet” on her own.
Allow her to choose something she can’t buy right now, but show her that if she saves her entire allowance for three weeks, she’ll be able to acquire it in three weeks.
This may be a good lesson: if you spend now rather than save, you will not be able to obtain what you truly desire later.
Ages 11 to 14: Display a range of uses for the money.
Your children are now old enough to comprehend that money may be saved for the long term (for college, for example), set away for emergencies, spent on things they desire or donated to others in need.
Use a “many jar method” to teach children the value of money, especially setting aside a certain amount of money for various uses.
They may have short-term objectives like purchasing a new iPod or contributing to a needy family, as well as long-term goals such as saving for a car or education.
The “jar method” teaches children that savings aren’t just for ‘leftover’ money. Savings should, in fact, come first, before any day-to-day expenditure.
Make sure you’re involved in deciding how much of your child’s money will go into each jar.
You should consider creating a bank savings account that produces compound interest for your child’s long-term objectives (e.g., a vehicle or personal computer).
Explain the power of compound interest and the growth of savings through compounding to your child so that he or she will establish a practice of depositing at least a portion of any money received (for birthdays, holidays, and special events) into a savings account.
It’s a wonderful idea to thank your youngster for his or her exemplary saving practices! Try matching her savings… For example, if your child’s aim is to save $20, you might add an additional $20 to her savings account if she meets that amount.
When your kid enters maturity and gets a corporate match through a 401(k) plan, this might build the framework for more disciplined savings later in life.
Keep track of your 15 to 18-year-olds.
With college on the horizon, you must lay the groundwork for budgeting.
While children may not be financially independent in college, they will almost certainly be required to handle their own money to some level.
To make budgeting relevant, the youngster should be earning money in some way, such as through an after-school or weekend work.
Children are often more cautious with money that they have earned than money that has been provided to them!
It is a matter of building on what the older child has learned up to this point in order to understand how to budget.
Money is only a means to an aim.
Money has several functions.
There will always be trade-offs.
Maintain a straightforward approach. Assist your kid in making a list of what she needs to pay for with her own money and assigning a price to each item (gas, clothing, entertainment).
Divide the list into necessities (fixed costs) and desires (discretionary spending), and then have your child live on the budget for a few months as a “trial run” before college.
To raise a saver, you must first model excellent financial habits and learn how to inspire your child at various ages.
Above all, because children learn by doing, let them have real-world money experiences, whether it’s establishing and saving for a goal or overspending and learning from it.
When it comes to a financially secure future, these life lessons are invaluable.
Best wishes for your health, wealth, and happiness.