For most adults, the first meeting with money management comes in the form of a coin collector box. You remember getting a buck from family after a task or doing a good deed and putting it in your piggy bank.
Did you know that kids as young as three years old can understand the theories of spending and saving? Not only this, but their money habits are typically set by the age of seven, according to a study by the University of Cambridge. As per the report, parents have the biggest influence on their children’s money-management habits. Consequently, the teaching of financial responsibility by parents should not stop with the piggy bank, as they are the first influence on their child’s financial behaviors. Teaching some good money habits to kids can save them from making some major mistakes in the future. The economic crisis indicates that every parent should start developing good money habits in their kids (from the age of three) to establish a well-founded financial base.
Here are some important lessons about money that we should all impart on our children to help them take control of their financial futures.
1. Model good financial behavior
The first and most important thing to keep in mind is that children have a tendency to do what their parents or their elders do. Children are very observant, and often adopt and soak in many actions simply from watching their parents. Therefore, parents should model good financial behavior by showcasing positive financial habits and philosophies on a daily basis. This includes things like shopping on a set budget, using coupons and discount offers to pay less for goods, and making choices between new and used baby accessories, which can all make a huge impact on savings. Do your research to demonstrate the opportunity costs involved, and talk about money management.
2. Save for the future
The concept of saving to build a successful financial foundation is very common, but it can be difficult to implement as kids quickly become attracted to the latest items on the market.
Open a savings account for your child to which they contribute each week. At the end of each month, show them the monthly bank statement — this will motivate them to save more from their weekly pocket money. This is the first baby step toward setting your child up for a lifetime of good financial habits.
According to a research by the University of Wisconsin-Madison, even preschoolers can learn basic financial concepts.
3. Involve them in shopping and budgeting
You can help your kids to learn constructive money habits by involving them in your weekly household goods shopping and in creating monthly budgets. During visits to grocery store and other shops, let children take charge of the shopping lists. Encourage them to choose the best products with value and use this situation to discuss spending, saving, planning, and more. Budgeting should be a part of yours, as well as your kid’s, life. The development of successful personal finance hinges on budgeting. Train kids to budget for every little thing.
4. Let them wait to buy something they want
This is the hardest lesson for every age group to learn, especially for teenage children. Parents should assist them in choosing things that they really need. Extra expenses will make them devalue the amount of money given to them.
“Money doesn’t grow on Trees” — this is the guide that every parent should use to raise financially responsible children. At an early age, kids need to learn that if they really want to buy something, they have to wait and save to buy it. Money lessons at this age set the tone for their future. Make them understand that going into a store doesn’t always mean you will buy something.
5. Let them make mistakes
Even if you believe that your child is about to waste their money on a toy or game they will be soon tired of, let them buy the item, because it might just teach them a lasting lesson. They will feel like they wasted money on toys they enjoyed only one or two times and will remember this in the future. So, let the kids do the work themselves, let them make mistakes and have fun. Explain how you learned from certain missteps in your own childhood.
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