Financial management is one of the most important life skills required for living a happy and healthy life. In this day and age, our society relies largely on parents to step in and teach their children effective habits when it comes to money.
If you’re interested in teaching your child money management skills but don’t know where to begin, here are a few basic concepts you can share with them at an early age. These ideas are a great way to get your child started with thinking about money in a responsible way.
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Teach Saving & Investing
It’s never too early to teach your child the basic concept of a budget. You simply can’t spend more than you earn. Additionally, the less you spend, the more you save. Consider offering your child an allowance and purchasing them a piggy bank or plastic bin for storing their hard-earned cash. You should encourage them to keep a ledger indicating how much they earn each week and documenting any expenditure. This gets them actively thinking about money and will also excite them as they watch it grow.
If you have the financial means, you might also consider opening a savings account for your child. Find options at places like a local credit union or your own bank. You can have them check their account periodically to watch how their money grows due to interest. It’s a great teaching moment for ensuring your children know that they can compound their earnings if they pick the right accounts.
Teach Them Delayed Gratification
This concept is difficult for people of all ages, and can be one of the most debilitating financial mistakes for all of us. It’s natural for children to want what their peers have. Actively seeking out moments to converse with your child about waiting to make a purchase or purchasing only what is needed can be a great predictor of their choices in the future. Make sure they are comfortable with the concept of saving up for an item rather than spending all their cash at one time. Encourage them to establish written goals that will assist them in staying on track.
Let Them Make Mistakes
As difficult as it may seem, there are times you will need to let your child make a spending mistake. Even if you realize your child is splurging on something they might soon regret, let them go ahead and make the purchase. These mistakes tend to have a lasting impact and provide a teaching moment they wouldn’t get otherwise. When the time is right, approach your child about their feelings without being overly critical. It’s important to let them come to their own conclusions and develop a better strategy for the next time around.
Set an Example
Your children watch and imitate you more than you may realize. It is extremely important you set the best example possible with your spending habits to make sure they see what good money management looks like. Try taking your children to shop with you so they can observe you making choices and seeking discounts. They will hopefully mimic these patterns in their own shopping routines once they get old enough.
Financial management is no easy task, but teaching your children these basic concepts early on will go a long way in developing their future habits. Help set your child up for success by incorporating these ideas at home and seeking out meaningful conversations about money when the opportunity arises.