How important is it to teach your children about money, its place, and its value? Considering that money does, in a lot of ways, make the world go round, you might think it one of life’s obvious lessons, gained through experience. Or you might assume that money management is tackled in school. Think again. Arming your child with the right attitude and necessary skills at the right time will afford them with the greatest possible advantage: the opportunity and power to make decisions.
How, and when to communicate money values to children is, however, one of the toughest challenges that parents face. Educating, motivating, and empowering children to become regular savers and investors will enable them to keep more of the money they earn and do more with the money they spend.
HOW DO YOU ACTUALLY GO ABOUT DOING THIS?
Discuss money openly. So many parents do not discuss finances within the family either because it’s considered inappropriate, or personal. Consider this: if you don’t actively provide the correct information to your child, how is he/ she to know, understand and inculcate your values? Therefore, as soon as your child can count, introduce him/ her to money. Observation and repetition are two important ways in which children learn. As they grow older, have frank discussions about how to save it, how to make it grow, and how to spend it wisely.
Help distinguish between needs and wants. These are habits that die hard, and influence how your child will approach money and its place in his/ her life. If they can differentiate between need-to-have and nice-to-have, then they’re halfway to a solid and secure future.
Set goals for your child. Better still, help your child set his/ her own goals. If it’s a toy that they must have, then regard this as a good opportunity to teach your child how to be responsible with money, and prioritise between what they want, and mindless spending. Allow your child to make spending decisions, which means that they will learn from the choices they make. And learn that it’s to their advantage to do a little homework before buying, waiting for the right time to buy, and actually deciding if the product selected is what they really want.
Encourage your child to save. Begin simply, as your parents might have done, with a piggy bank. If you do give your child an allowance, get them to set aside a small portion of it every time. Explain and demonstrate the concept of earning interest income on savings. Provide an incentive; offer to match what your child saves on his/ her own.
Help your child maintain a record of money saved, invested, or spent. To make it easy, use 12 envelopes, 1 for each month, with a larger envelope to hold all the envelopes for the year. Encourage your child to save receipts from all purchases in the envelopes and keep notes on what he/ she does with his/ her money.
Use real-life experiences to demonstrate everything you want to teach.Learning by observing and doing is the most powerful tool. Such as when you go grocery shopping, and can use the opportunity to showcase planned spending, or how to recognise value for money. Or if you decide to use a credit card at a restaurant, you could show your child how a credit card works, when it can be used, and how to calculate a tip!
Finally, your child needs to understand that spending money can be fun and very productive when spending is well-planned, and that a penny saved is, indeed, a penny earned!
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