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It’s the essential life skill that our children, no matter what they end up doing in life, are always going to need. But good money management is still something a lot of parents shy away from discussing, fearing that the subject is too adult. Learning about personal finance can be done in an age appropriate way, and is a valuable series of lessons to teach kids as part of your portfolio of lessons.
We face a situation today where many children bloom into young adults and go off to college or get their first job still not properly understanding the basics of money and how to create a budget. No wonder that the average household is now thousands in debt and not accustomed to being smart with their cash. You can make a change by adopting an open, honest approach to money with your children and involving them in simple lessons about how to spend, save and budget….
Lead By Example
In order to understand money, your children have to see it in practice. So start by discussing your financial choices and habits with your children, in terms that they will understand. Start by taking them grocery shopping with you and discuss the choices you are making and the comparative cost of items. Introduce the concept of value and expense by looking at different sizes of the same item and their relative prices.
Show your kids that it pays to shop around when you compare auto insurance quotes or source goods cheaper online that you have purchased in store. Don’t worry about the detail – just let them know the general concept of weighing up what you get in return for your spend and using judgement to make the best purchase. If you lead by example, they will follow – and you may even develop better habits yourself as a consequence. A study by The University of Cambridge found that children’s financial habits are already formed by the time they are just seven years old, so make sure you’re setting a good example.
Give Kids A Savings Mechanism
Encourage your kids to save using a clear glass jar rather than a closed piggy bank – that way they can see as the money mounts up. If they want to save for a specific thing, help them to create a simple savings chart for kids to illustrate their target and their current progress. Make a habit of discussing the idea of saving versus spending, and explaining that some purchases are longer term ones. Help older children to weigh their money decisions up, discuss the options and consequences, but let them make their own purchasing decisions.
Help Your Kids Understand Earning
Instead of just handing over an allowance, it’s far more valuable to ask your children to do chores for the money. It instills the idea that all money is earned by effort, and that they need to work in order to afford nice things. Find simple chores appropriate to their age like feeding and walking family pets, or doing some gardening. This approach gives children self-confidence and a sense of control over their own financial destiny.
Avoid Impulse Purchases
Impulse purchases are always things that we don’t need to buy. So teach your children techniques for avoiding this. They could make a wishlist of all the things they want, and decide to only make a purchase when an item has been on the list for two weeks. Also show them not to buy the first thing they find out shopping, but to check out other options and compare prices before handing over any money. This lets them see that having a ‘cooling off’ period before any purchase is a great idea – and very often we no longer want the item we could have wasted our money on when we really think about it.