Being good with your personal finances is an essential life skill. It’s not just about the money you can save but the freedom it gives you to make decisions out of choice rather than necessity. That choice is something that all of us wish for our children to have in their lives, and passing on the basics of good money management is a lesson all parents should seek to give.
With a concept of how to build wealth and control your own financial destiny, children can grow into confident adults with the skills and opportunities we want them to have. While experience is really the only route to learning prudence, there are many important things we can instill during childhood that will help our kids make the right decisions later on in life.
If we give the gift of understanding finance, we empower the next generation.
Still many of us worry about exposing our children to adult worries too early on, and so we avoid the concept of talking about money at all. Children are never too young to be involved in the more age-appropriate aspects of family finance.
Give Them a Piggy Bank
In this age of cashless transactions and mobile payments, the idea of giving a child an old-fashioned piggy bank seems a little retro.
But there’s nothing that will teach them about money and it’s value more than giving them cash of their own to control.
Handling coins and notes is a graphic illustration of where money goes. Allow your child a decision about spending and saving when they receive money. If they can see the piggy bank filling up, they can understand that they can use that money to get something they really want.
Saving up for that much-desired toy today could easily translate into saving up and browsing an executive condo for sale tomorrow!
Give Them a Bank Account
When your child has filled their piggy bank, take them into the bank branch and open a savings account with them. Let them choose what to save and what to keep back to spend on a treat.
Use a simple method of explaining interest to them so that they understand. Kids are not generally great at delayed gratification, so teaching the lesson that if they leave their money in savings it will grow and be worth more is very important.
Teach Them Value
A simple trip to the shops can be a really valuable learning opportunity. Most of us don’t have a dialogue with our children about what things cost and why, but it can be really useful to talk through your grocery budget, what you need to buy, compare brands, sizes, and prices, and ask your child to find the best deal.
It’s a great game for keeping them focused and behaving while you shop, but it also teaches them about the difference between value and cost—a lesson that even many grown adults struggle with!
Talk About Financial Choices
Where it’s appropriate to talk about financial choices for the family without over burdening them, seize the chance. Give them the concept of money coming in each month via a salary, a portion going to savings, some to meet expenses and then a remainder left over to spend for fun stuff and treats.
Money shouldn’t be a taboo subject around children.
Teach them that while finances do not define the worth of a person, if you are informed about what you do with your money, it can give you more choices in life.
Show that there are times to save and times to spend. Explain that money is a form of energy—you expend energy to get it, and you can either save and grow it or give it away for goods and experiences.
Giving an allowance is always a good idea as it teaches children to manage money on a small scale. Talk to your child about their money decisions. Offer options on what they could do with it but don’t take away their power to make decisions themselves.
Ask if there is anything they would like to save up for. Help them to create a savings timeline that shows how long it will take them to save the money needed to bring it all to life.
Ultimately, we can’t control the financial decisions our children will make as they grow into adults, but we can give them the tools to make informed choices of their own.