Four financial lessons for children
As a parent, there are so many things it is your duty to pass on to your child. Morals, respect, behaviour, not to mention fall the practical aspects of life.
One thing that often gets forgotten in all that is finances.
Teaching your children about money isn’t some distant scenario to be saved for when they are about to leave home – it’s something that should be instilled gradually, from their earliest years. We should not take the approach that finances are ‘adult’ – money is a part of everyone’s life and wellbeing. You can teach lessons in an age appropriate way that will get your children used to some financial basics early on.
Living by a budget is essential to balance finances, so give your child the gift of understanding what, why and how when it comes to managing money. Teach them that everyone has an income and outgoings that need to balance.
Explain why a budget is important to take care of the big things, like utilities and buying the food each week. Even from a young age, kids receiving pocket money can learn how to budget it to afford items they need to buy and also to save up for things. Don’t make it onerous, just a natural part of receiving the allowance – ask simple questions about what your child wants to buy and how they will be spending it or saving up for things. Make them question and understand their own decisions rather than being impulsive.
Teach them that they have a choice in how they spend their money. As they get older, you can then progress to very simple budgets that allow them to plan for their income and how to divide it up. Add in categories such a ‘treats’, ‘savings’, ‘granny’s birthday present’ or ‘charity donation’ and ask them to allocate amounts they will need.
No one wants their kids to get into debt, and avoiding the topic of credit and how to manage it, or treating it like something evil is definitely not the right approach.
Credit can be a powerful tool if you choose to use it right. Talk to your child about why they may need to use credit in the future and how it can be managed with platforms like creditrepair.com. Speak about the negative consequences of not using debt appropriately, and the importance of making repayments on time and budgeting for them.
Building Up Savings
Educate children about how and why savings are important.
Explain that having savings means you can cope with unexpected expenses and pay for things that cost a large amount of money. As they get older, talk about different pots of savings – ‘rainy day’ money and savings for specific outcomes such as purchasing a car. Children should practice making savings from their own income- let them make their own choices about it.
Empowering children to manage their own money is the key to letting them feel the power of control over their own finances- and the consequences if they don’t stick to budget.
Let’s not forget about the importance of sharing and raising generous children. When combined with solid financial training, lessons in generosity and charitable giving will have a positive impact on your child’s personality and outlook on life!
Over to you…
What do you think of these four financial lessons for children? Add yours in the comments below!