You’ve taught them how to tie their shoelaces, to be careful around strangers and awkwardly touched on the whole birds and bees thing when forced into a corner. But if you haven’t talked to your children about the importance of financial responsibility, you could be depriving them of crucial life skills that will impact their relationship with money forever. Here are six simple ways to set them on the right path for financial success.
1. This little piggy went to the bank
Once your child has mastered the concept of feeding his toonies into a piggy bank, setting up an actual bank account is a great way to teach him about savings and interest. It can give him a sense of accomplishment as he watches his money grow – and feels the sting of taking it out. You can also explain how banks work, going into a little or a lot of detail depending on your child’s age. This experience will help set up good financial habits for later in life.
2. Money doesn’t grow on trees
There are different ways to teach your children about the value of a dollar. Sometimes this means giving them an allowance to manage, and sometimes it means encouraging them to take odd jobs outside the home that appeal to their interests. This might be dog walking, babysitting or being a lifeguard. It will give them a chance to hone skills that can foster a sense of pride and accomplishment, while developing a healthy work ethic.
3. It’s not about the price tag
As soon as children are able to add, subtract and count money, they’re ready to understand the basics of budgeting. Explain the importance of having a budget to prevent overspending, but also let them know they’ve got to make wise decisions about how best to spend that budget. You know that a lower price tag isn’t necessarily a better deal – but they don’t. Take them shopping with you and show them how you allocate your spending. Why you spend more money on some items – that are better quality, rather than paying less for a substandard product. Explain that two pairs of poorly made shoes for the same price as one pair made to last can save money in the long run.
4. Master your card
Children who watch their parents frequently pull out a credit card to make purchases will come to their own conclusions about monetary exchange if you don’t explain where that money is coming from. Explain how credit works and show them the true cost of the item, taking interest into account if those balances aren’t paid off in full each month.
5. Pay it forward
Whether it’s with their time or money, show your children the importance of giving back through philanthropy by letting them see you do the same. Tell them which charities you choose to give to and why, and help guide them in making their own decisions about how they can give back. This instills charitable values and a sense of community, and may even help them identify skills and interests that could impact future career choices.
6. I want you, I need you, I love you
Even the best budgeters have wrestled at one time or another with decisions about what constitutes a luxury versus a necessity. “That Cartier watch will let people know I’m successful and then my career will really take off – I must have it!” you reason with yourself. For children, the social pressure can be so intense that everything feels like they have to have it or they’ll literally die. When you teach them that needing a new shirt doesn’t mean needing a $400 shirt, be sure to let them know its okay to want these things (and even splurge once in awhile) but that as a general rule, they could probably spend that money in a more productive way.
Lucy Conte, T.E. Wealth
Source: T.E. Financial Consultants