Teach your children these financial lessons, and you’ll likely save them from money disasters later on.
In this article:
- Explain the Value of Money
- Help Them Save
- Encourage Them to Invest
- Ask Help in Creating a Budget
- Teach Them the Value of Waiting
- Control the Credit Card
- Let Them Work for It
- Create Financial Goals
- Teach Them About Contentment Early
Teach Your Children These 9 Financial Lessons, and They’ll Be Prepared for the Future
1. Explain the Value of Money
One of the important points to teach your children about money is the fact it’s not an infinite resource. You have to spend many hours to earn it. You cannot foolishly spend it on items that are not valuable.
The problem is many children don’t get that, and it’s understandable. They see you go to banks or automated teller machines, and you have the money right away. They are not yet able to fully comprehend adult responsibilities such as bills.
As a parent, you can teach kids to value money. A good way is to give them an idea about your hourly wage. Then compare the amount with the items your children wish to buy. This way, they will have an idea of how much time you have to work to give them what they want.
Another strategy is to explain the roles and rules of banks in your life. They don’t produce money for you but rather keep the money for safety, among other things.
Most of all, inspire them to give to charity. Let them choose a cause they’re passionate about. This can help them realize having money is never just about buying things. It can also be used to make other people’s lives a lot better.
2. Help Them Save
There are at least two essential money lessons to teach your kids: saving and investing. They need to learn to save first before they can consider growing it, though.
Teaching your kids to save starts with setting a good example. You can bring them to the bank every time you place a deposit into your savings account. You may ask them to sit close to you when you keep track of your family’s savings.
Another option is to let them write down a wish list. Encourage them to enumerate the things they need or want to buy. Then, you can set up a savings account or hand them a piggy bank so they can start saving money right away.
Once it’s time to purchase, give them free rein and allow them to pay for these items at the cash register.
3. Encourage Them to Invest
Do you know you can set up a Traditional or Roth IRA on behalf of your kids? These individual retirement accounts allow them to save and invest their earned income. The money may come from babysitting, mowing the lawn, or even operating a lemonade stand.
They can withdraw their contributions once they reach college or when they want to buy a home. If they’re into a Roth IRA, they can withdraw without paying a penalty. Best of all, the distributions are tax-free.
Explaining investing can be difficult, especially if you also don’t know much about a Traditional or Roth IRA. If this is the case, ask for help from a financial planner. Look for those experienced with families or children.
Another type of investment to focus on is the quality of the item. Children need to know in a lot of cases it’s the value, not the price, that matters. It’s better to spend a bit more on something that lasts for a long time.
4. Ask Help in Creating a Budget
It doesn’t matter how much you earn. If you don’t know how to track your expenses, you will consume all of it. One of the basic financial lessons to teach your children is budgeting.
There are three ways to do this:
- First, you can ask them for help when you’re creating a budget. After all, the expenses affect not only the couple but also the entire family. For example, you can sit down and talk about food. Give them an estimate on how much you’ll likely spend the next month. With the amount, let them decide which grocery items they want to include.
- The second strategy is to let them make their own budget. You can give them a set amount each month and control over how they want to spend it. Mind you, they will make a lot of mistakes along the way. The good news is they will learn to work around the money they have.
- You can also do the envelope or the jar method. You can have separate containers for each of your major expenses. If your children wish to contribute to the budget, they can put theirs in these places.
5. Teach Them the Value of Waiting
Compulsive buying is real, and the risks can begin very early. One of the methods to curb it is to teach your children how to wait. You can do the following:
- Apply the 30-day rule. If your child sees something they like, have them wait for at least 30 days before they make a purchase. If they still want it, you can then buy the item for them to encourage them to save money.
- Do comparison shopping. If your child still has an interest in a toy, for example, you can compare the prices from different stores first. This teaches your child a purchase requires careful thought and consideration.
- Be wise with sales. Nothing increases the compulsion to buy than an item on sale. More often than not, you’ll end up getting something you don’t need. When it comes to sales, ask yourself first if the item is a need or just a want.
6. Control the Credit Card
An average American these days has credit card debt of over $6,000. It’s a financial burden that your child shouldn’t have to pay later.
You can learn to control credit card use within the family by not giving these plastics to your children. If they need something, they can pay for it in cash. If they deserve a little more independence, they can opt for a debit card.
7. Let Them Work for It
You can teach your children to earn their keep. They may run their own business or help out neighbors in exchange for a few bucks. You can consider giving them financial rewards for every good deed or chore.
In turn, they learn how to save money. They also become responsible and accountable for their decisions and actions.
8. Create Financial Goals
Are your kids itching to go to Disneyland? Would you like to spend your summer cruising the Caribbean? Perhaps you want to upgrade your car. It is necessary to have a couple goals, but you need family dreams as well. This way, you can involve your children in financial planning.
By setting goals, you can teach them the basics of short- and long-term planning. They will learn to be patient and to be smart with finances. You can talk about budgeting and making sacrifices so you can reach your objectives.
9. Teach Them About Contentment Early
Contentment is not about settling. It is about finding joy in the things you already have or learning to be grateful. As your child grows older, they will encounter kids whose parents probably give them whatever they want. It is possible for them to also ask you for certain things and feel bad if you can’t deliver due to certain factors.
Of course, it’s perfectly fine to want more but they also need to know they cannot have everything. It is in learning to be thankful for what you have at any given moment that will make life easier.
There’s no better time to teach your children about money than today. This will give them enough time to make your financial lessons into habits. Give them these tools, and they will live comfortably. If they encounter challenges, they can find a way to solve them. In other words, they become confident, financially literate adults.
What financial lessons do you want to teach your children? Share your list in the comments section below!