How to teach your kids to be financially savvy
It can be hard to teach your kids about money, especially in a world where the media constantly teaches them how much fun it is to spend. It’s never too early to start, though.
With the recent economic downturn, it has become more important than ever to teach your children to be financially savvy. The sooner you begin teaching them the basics of personal finance, the better off they will be when they are older and have more responsibilities.
Here are some tips for getting your children started on their way to being financially savvy!
Teach them how to set and reach goals.
If your children don’t know what they want, they won’t be able to make a plan to reach their goal.
For example, if you tell your kids that every week they need to save $20 from their allowance or any other earnings (if you give an allowance), then at the end of the month, when money is tight, they’ll still have some cash flow coming in.
There are many more examples like this one! Try not to scrimp on setting attainable goals with rewards attached so that even small steps can feel rewarding and motivating.
Also, teaching them about avoiding debt by never borrowing money unless absolutely necessary will help keep them out of trouble later as well!
Teach them how to make a budget.
Have your kids write down everything they’d like to buy for one week (or month).
Then show them how much money they have and ask what else they would need or want if their funds were limited. You can even use play money, pretend credit cards, etc.! This will help teach your children about priorities; not all wants are needs.
Also, it’s important that you explain this concept yourself before having your child do the exercise. Every parent has different expectations of their kids’ financial responsibility levels (i.e., allowance amounts).
Set up an allowance system that rewards them for chores
This will help your children to see the link between work and reward. It’s also important because it teaches them about the concept of delayed gratification, which is a wonderful life lesson.
I would recommend tieing allowance to chores because it’s more likely your children will do their chores if they are getting paid for them, but you could also use this system to reward good grades or other accomplishments as well!
For example, give them a set amount of money per week/month, and every time they perform one or more chores, you take away some of that allowance. They can also earn extra cash by completing additional tasks!
Teach them about saving
Allowance amounts are not the same as savings! If you give your child an allowance, which is typically given weekly or monthly (depending on how often they do chores), then at the end of that period, show them their balance and let them decide what to do with it.
They could spend all of it, put some away for a rainy day, take out $20 bucks each week until it’s gone – whatever makes sense to them so long as they understand why they’re doing it in a sensible way.
You can even get creative here if you want to make things fun, like having jars set aside for spending money vs savings, etc. The point here is just teaching children positive habits when it comes to money.
Give them responsibility for their own money
If you really want to prepare them for their future, they must be at least partially responsible for managing their own money.
There are many ways you can do this – whether it’s giving your child a small allowance every week/month or allowing them options over some of the things they buy with their own funds!
You could even allow an older teen to have a job outside the house where they manage all of their paychecks and spend on their own (with your supervision). This will give them real-world experience about what it means to be financially independent.
Teach them to pay with a credit or debit card
If you want to teach your children how debit cards work, try having them pay for everything with a debit card for kids to use.
They must understand the difference between spending what they have (with cash) compared to charging it and then worrying about making payments later on.
You can also show them how interest works by opening up a savings account together to make deposits each month and let their money accumulate over time!
This will help demonstrate why it’s better not to spend all of one’s earnings since at the end of the month, even if there is nothing left in an individual checking or savings account, some interest may be earned, which builds over time.
Don’t bail out your kids when they make mistakes or get in trouble
If your child gets into trouble and makes a financial mistake (whether it’s not paying for something or borrowing money from someone), don’t bail them out!
It will only teach them to make the same mistakes again because they know their parents will always be there to save them.
Instead, you should try giving advice so that they can figure out how to fix things themselves next time around without having learned this lesson the hard way through poor choices.
Give them well-rounded financial education
It’s important to give your children a proper education on the basics of personal finance, even if they are still young!
Many kids don’t learn about things like interest rates or why it’s important not to spend all their money until later in high school or even college when it’s too late for some people because there is a lot of financial pressure involved in their lives.
You can use the internet to find free resources for teaching kids about personal finance, or you could even join some forums and discussion groups where parents talk about these topics as well!
The basics are fairly simple, but it’s important that your children understand them from a young age so that they have the foundation for being financially independent adults.
Conclusion
If you want your child to be financially savvy by the time they are older, then you must start now. By the time they are teenagers, you’ll have a much easier time connecting with them and teaching them about money!
Thank you,
Glenda, Charlie and David Cates
