5 Ways to Teach Your Kids About Money
Parenting is more than just providing for your kids – it’s about raising them to become responsible adults. One of the most crucial skills they need to learn is how to manage money wisely. We are usually inclined towards being either spenders or savers, and we can nurture healthy financial habits in our children that will benefit them throughout their lives. Let’s address five ways your kids will appreciate later in life when dealing with money. This is not just about their independence; when they’re responsible with their finances, you also get to enjoy more of your retirement funds. It’s a win for everyone!
1. Show them that money doesn’t grow on trees
While it’s commonplace to tell kids that we can’t buy everything because “money doesn’t grow on trees”, they need to fully grasp this concept. Kids often see ads encouraging instant gratification and impulsivity, and that’s why we must lead by example. If parents blatantly spend money and then claim they’re broke, kids see the contradiction. They won’t respond positively to this. So, follow a strict financial discipline, and your kids will follow suit.
2. Teach them about credit cards
It’s easy for kids to think that a plastic card can pay for everything. But we need to demystify this belief. Explain that the money on the card has to be repaid and that overspending might result in paying more through interest. To help them understand the concept of a budget, consider giving them a weekly or monthly allowance. This will provide them with firsthand experience of how to budget their money.
3. Distinguish between needs and wants
People often want more than they need. The crucial things in life include food, shelter, education, healthcare, and clothing. Going to the movies, eating ice cream, or buying extravagant shoes are merely desires. Once children understand this distinction, they’ll be more likely to be frugal and save. Encourage this by setting a structure for their money – specific proportions for savings, expenses, and possibly charity.
4. Discuss money matters respectfully at home
Children are perceptive. They can link money to stress or conflict if they continuously see their parents arguing about finances. Therefore, steer clear of negative statements like “we’re broke” or “we can never afford that”. A better approach is to encourage responsibility, saving, and planning. You can incentivize kids to save by rewarding them for chores or good grades.
5. Use visuals to explain budgets
A pie chart can be a great tool to teach budgeting. For example, break down a hypothetical $5,000 monthly income into rent, utilities, food, school fees, etc. This visual illustration can enable children to understand budgets better. You can even let them join you in tracking expenses to know how much money is left after paying for necessities.
In a nutshell, instilling these habits in your children will set the foundation for their future financial successes. Get started today and watch them grow into financially responsible adults.