As parents, we are often reluctant to discuss money with our kids. Perhaps we fear that focusing on money early in life will rob our children of a certain innocence. Or perhaps we can never seem to find the right time to broach the subject?
Whatever the reason, it is important that we find the time to educate and talk to them about money. Learning to be responsible with money is imperative. What they don’t learn now, could come back to haunt them in the future, and the last thing we’d want is for them to have to seek debt help and advice when they are older.
Ten Indispensable Money Lessons Parents Should Teach Their Kids
There is no time like the present to begin teaching your children how to properly manage money. Nothing else will have as big an impact on the quality of the life they ultimately lead. Here are 10 things every parent should teach their child about money while they are still children.
The value of saving
With young kids, you can help them decide on something they’d like to have, then provide them a piggy bank into which they can put part of their pocket money. When they’ve saved the requisite amount, take them out to get the coveted item. When they are a little older, you can open a savings account for them and offer to match whatever they put aside.
How to manage income
If you give your child £3 per week, make sure a set amount gets put aside for savings and that they understand that when the rest is gone there is no more until next week. It’s probably a bad idea to link the allowance to doing chores because they also need to learn that there are some things called “thankless tasks” and that life is full of them.
How to make smart purchases
Encourage comparison shopping at a young age and you’ll save your child untold amounts of money over the course of their life. Take them with you from store to store as you look for better deals on things you need. Teach them to use the Internet as soon as they’re old enough to find a better price.
How to earn money
Let your kids know that there’s extra money to be made for doing extra chores. As they get older encourage them to offer their services around the neighbourhood mowing lawns, taking the bins out or babysitting. Make sure they put aside a portion of everything they make to reinforce the savings lesson.
How money can work for them
Teach them about compound interest and how enough money saved can eventually become a substantial income generator. Visit financial websites that have free compounding calculators so they can see how the principle works and how once savings reach a critical mass they tend to take on a life of their own.
How investments work
This is obviously not something you’re going to teach young children, but once they reach double digits you can start with some investing basics and even purchase a few shares for them so that they get used to checking stock prices and following market trends etc. Always be ready to answer any questions.
How to balance a chequing account
By the time your child is 13 they should have a chequing account and know how to balance it. They should know how to balance income with expenditures, avoid overdrafts, avoid unnecessary ATM fees and maintain a minimum balance in order to avoid penalties.
How to accept they can’t have everything
Unless you’re Bill Gates, there are some things that will always be a bit beyond your financial reach. It’s important that kids learn that early. This is not to say you need to encourage a life of denial, but rather that on occasion it’s actually better to say ‘no’ when your child wants something than to say yes.
The importance of staying out of debt
Kids need to learn that a credit card is actually a loan card and that the loan will need to be paid back. While you taught them earlier how interest can work for them, you’ll now have to teach them how interest can work against them if they get into the minimum payment trap.
The value of generosity
Kids need to learn that a society is only as strong as the will of its citizens to give something back. Sometimes that means donating your time to a soup kitchen. Sometimes it means donating a toy to charity at Christmas and sometimes it means donating money to a church or temple. Explain the different types of giving, why they’re so important and why they should be willing to engage in all of them within reason.
The sooner the kids learn basic principles of money management the better off they’ll be.
Pin it for later: