Nobody is born with an inherent talent to manage money well. It is something you need to learn; otherwise, you risk spending all of your money in one place, and you’ll never understand what it’s like to have any cash. Like your parents (hopefully) taught you all about money, you need to pass this onto your children. Otherwise, there’s the risk they will be asking to borrow £20 well into their thirties, and that’s not something you want.
But how do you teach a kid about money, and when do you start? Here are eight ways to teach your kids about money, starting as early as they can hold a coin and not feel tempted to stick it in their mouth.
Use a Clear Jar
Many kids will grow up using a piggy bank, but your children won’t get the witness the money gradually growing as these are opaque. A piggy bank is fun to empty after a few months, but it can also be frustrating, as you never know how much you actually have.
By using a clear jar, your kids get to witness the money level rising in real-time. They will see how every contribution helps to build their funds, which will teach them why earning money and not spending it is so important. Make a big deal about this, and they will get more excited about putting money away, especially if they are young.
Make Them Earn It
Some parents will give kids money for the sake of it. However, while this is a nice thing to do and allows your children to have fun with friends and have a little autonomy, it doesn’t teach them why money is important.
Instead of giving pocket money just because they will be better off earning it through chores and doing well in school. They will feel like they have earned their pocket money after tidying their room, doing the hoovering, cutting grass or getting top marks in their weekly spelling test, and this will foster a hardworking attitude that they can take through life.
Avoid Impulse Buys
Everyone falls victim to impulse buys now and again. Usually, it happens as you get to the till at the supermarket where they love to fill shelves with things you don’t need but would still be nice to have. Kids may not realise these impulses exist right now. They will just think something is cool and pick it up.
However, impulse buys can be a severe detriment to their financial security. It’s essential to teach them that just because they want something now doesn’t mean they need it. If they need to wait to make a purchase, they might find out it is not as crucial as they initially believed.
Help Them Set Out a Budget
Budgets might not be fun (at least not for most people), but they are crucial for ensuring excellent money management. As kids will have no idea about how to make a budget, you need to offer assistance once they start earning their own money, or even before that.
By outlining their incomings and outgoings, they can determine how much they can use for fun and how much they need to save. Getting them used to budgeting early on will help them do the same once they start earning more money, move out, and start paying their way without falling into debt.
Let Them Consider Opportunity Costs
Opportunity Cost is when they consider whether a purchase is necessary. You can encourage them to consider if they need to make a purchase, and what it could impact in a week. While they may want to buy a new video game, this will mean they can’t afford to buy lunch or go out with friends next week.
Demonstrating Opportunity Cost will help kids understand the value of money and the consequences of frivolous spending more succinctly. It can encourage them to think again when it comes to making purchases, and also weigh up what type of purchases they must prioritise.
Inform Them About Credit
Good credit is everything when it comes to their later life, but many parents fail to inform their kids about what credit is so important nor do they tell them about the problems that can come from ending up with bad credit.
Your kids will want a credit card at some point, so you should encourage them to pay it off regularly and not use it as a crutch to make impulsive purchases. You can also tell them about the solutions if they do encounter credit issues and check out this Debt to Success System review that will give them a solution should they struggle to make a payment here and there.
Encourage Saving (And Show Them The Benefits)
Saving is something that everyone should try to do, and it comes with learning all about budgeting and the value of money. Still, when kids see the numbers ticking up in their bank account, they find it difficult to part from it.
Encouraging them to save around 20% of their paycheck every month will give them a comfortable buffer for emergencies such as car repairs or flat disasters.
Be An Example
You can’t expect your kids to be good with money if you do not set an excellent example. Even though you might have the money to spend, this doesn’t mean you can buy whatever you want at will. Your kids will use you as a model and mimic your spending habits and behaviour, so if you show financial discipline, they will do the same.
Smart Money
No parent wants their children to be financially dependent on them forever, and kids don’t want to come to the Bank of Mum and Dad, either. You can avoid this by teaching them all about what makes smart money management possible, and getting them used to dealing with cash as early as possible. By starting early, your kids will be confident with their finances and understand the value of money to keep them from making impulse buys and wasting their hard-earned pennies.