As a parent, it’s your responsibility to help your children to be confident and sensible with money.
When they receive money as a birthday gift, insist that they set aside a percentage for their savings. When they get their allowance, remind them to budget any extracurricular activities they choose to participate in. Every time the opportunity presents itself, discuss making small and large purchases, and then how they can save for them.
Over time, children will understand how money is used to acquire goods or services and how it can be spent wisely.
You shouldn’t be intimidated by teaching your kids all about finances. Here are some excellent ways to help your children learn to be responsible with their money:
Teach Them Where Money Comes From
The first thing you should teach do is explain to your kids how money is earned, and introduce them to ways they can make money as kids. Make the link between having a job and being able to enjoy having money to spend. To demonstrate this principle, you can assign paid tasks to your children, which helps them to fully understand the value of hard work.
Make sure that these tasks are not their usual chores. For example, you might offer to pay them for mowing the lawn or picking up items from the store. There are different tasks you can ask them to do, depending on their age.
Use A Money Jar
When you want your children to appreciate the value of saving, you should start with a simple money jar. Kids appreciate it when they see their money grow in the jar every time they save it, rather than making impulsive purchases. When they’re old enough, take them to the bank to open an account, and make them responsible for their savings.
Show Them How To Monitor Their Spending
Another way to let children understand the value of money is to give them actual money and monitor their spending. For example, get them to write down everything that they eat or buy in school. When they come back home and list what they have eaten, they have the opportunity to learn the difference between an unplanned snack and a planned one.
This will also teach them the value of wants and needs. Looking at their spending habits will make them realize how much money they’re wasting on items they don’t necessarily need. They can also learn how to find cheaper alternatives to save more money on their purchases.
Introduce Them To Following A Budget
There are many benefits of teaching financial responsibility to children; one of which is that they learn to make better financial decisions. Teach your child how to be responsible with their money by giving them a fixed budget to follow. When they know what their allowance is each week, they will be more likely to stay on track.
You can also limit how much they spend each month on clothes, video games, and entertainment. Many kids don’t realize that they can get into trouble by spending too much money. It is essential to set a limit so that they learn how to stick to it.
Setting a budget for them and explaining the advantages and disadvantages of having a particular amount saved for emergencies will help them realize the importance of having good spending habits.
They should save some of their income for emergencies and, when they’re old enough, buy what they need for daily living. This helps kids to learn how to prioritize what they really need against things they simply want; a key step in developing financial responsibility.
Teach Them About Investments Early
Children need to learn the basics about stocks, bonds, investments, the stock market, and other financial topics like types of mutual funds and insurance. These are great ways to teach kids about money and help them to understand complex concepts from an early age will pay dividends when they’re older. Teaching kids about investing will give them a realistic expectation of what they can do with their money, as well as steps they can take towards future financial security.
Teaching kids about money might seem daunting, but when you take your time and offer consistent advice, it’s not that hard. You can begin the process of understanding finances from an early stage in their lives. Teaching kids about money now will prepare them for future life decisions regarding spending habits and retirement. It also instils in them the importance of savings and the importance of investment.