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7 Ways To Teach Your Spoiled Child About Money Management

7 Ways To Teach Your Spoiled Child About Money Management

If you’re counting on the public school system to teach your children about money management, prepare to be disappointed. There is only one person with the power to turn your spoiled child into a fiscally responsible adult: you. Here are seven tips that might help.

1. Don’t tie allowance into every single chore—

Household chores should be done without expectation of payment. Tying your child’s allowance into the simple act of cleaning house is a sure-fire way to raise your child to become a messy adult with a home so disgusting that no one would ever want to visit. Instead, explain why a clean house is a nice thing to have. You could say something like:

“I know mopping floors and cleaning counters might not be exciting, but we need to clean up once a week, because it is easier to have fun and relax when there are less messes to worry about. Also, if we don’t take care of the kitchen, bugs could get to our food, and isn’t that gross? It would make me feel really good if you helped me take care of that.”

2. —but offer incentive for tackling challenging tasks.

While you shouldn’t bribe your kids to do chores (something they should do for no financial reward), you should offer incentive for tackling projects that require more time and initiative. You could set a flat-fee for more complicated tasks like mowing the yard, organizing the closet, and boxing up unneeded clothes and toys for a yard sale or charity drive. Feel free to take this a step farther by encouraging your child to open their own lemonade stand or yard-work business. You’d be smart to teach them how to market themselves at a young age, because a college degree doesn’t guarantee a good job in today’s economy.

3. Draw a diagram to illustrate your family’s priorities.

It’s difficult to explain fiscal responsibility to children in words that they will comprehend, so why not draw a diagram to illustrate fiscal responsibilities in a way they can understand? You don’t need to be a Michelangelo or Donatello; just draw an inverted triangle like this:

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inverted-triangle

    Then list your expenses in the order of their priority like so:

    • Shelter (rent/mortgage)
    • Food, clothes, and other groceries
    • Utilities (heat/air conditioning, electricity, water, phone, Internet)
    • Savings/Investments (emergency expenses like doctor visits, long-term investments like vacations to theme parks and beaches)
    • Charity/Giving (helping those who are less fortunate)
    • Wants (ice cream, toys, movie tickets, video games)

    While it’s okay to spend money on things your child would like to have, you need to make sure they understand the key difference between “needs” and “wants.” Using the inverted triangle as an illustration, explain that your family has an awful lot of needs that must be met before you’re able to consider your child’s individual wants. Repeat this lesson as often as necessary, because it’s vital for your child’s long-term financial success.

    4. Use three separate piggy banks: saving, giving, and spending.

    This tip is repeated often enough to be obvious, but it’s obvious because it works. Get three piggy banks (or anything else childlike that money can be stored in), label them as listed above, and set a percentage for each category like so:

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    • Saving = 50%
    • Giving = 20%
    • Spending = 30%

    I’m not suggesting you must use those percentage points listed above; see them as a general suggestion, not a strict guideline. Set them in your own way that fits your personal beliefs about how money should be spent, and/or what you feel would be most beneficial to your child.

    5. When appropriate, turn those piggy banks into interest-earning savings accounts.

    Children seem to learn better visually at a young age, so I’d recommend using the piggy bank approach until they are old enough to grasp the concept of “interest-earning savings accounts.” When you feel they’re ready, take them to the bank to open their first savings account. Make sure you explain why this is a good thing for them to do by saying something like:

    “I’m so happy and proud of you for saving (Insert Dollar Amount Here)! But now we’re going to put that money in a credit union, because they will pay you a little bit extra just for being smart enough to save your money.”

    Share a bank statement with them quarterly and make a big deal out of how well they are doing by pointing out how many dollars they made in dividend, and exclaim, “Wow! If you made that much with the x-dollars you put in there, I wonder how much you can make if you invested y-more-dollars every time you get paid your allowance?”

    6. A thoughtful gift is better than an expensive one.

    Have you ever really watched your child while they open presents during Christmas or their birthday? If they are ripping away wrapping so rapidly that they don’t even take a moment to react to each individual gift before moving on to the next one, you might have a spoiled child who doesn’t appreciate anything. If you don’t think thoughtful gifts are better than expensive ones, please recall a baby (yours or otherwise) who you’ve seen open an expensive toy, only to find the box it came in much more fun to play with than the toy itself. Materialistic stuff never made anybody happy, so stop buying your child every shiny, new thing under the sun, and start focusing on more frugal (but thoughtful) ways to express your love.

    7. Use grocery shopping to illustrate buying for value.

    Just in case you weren’t aware, there isn’t typically any difference between name-brand labels like Green Giant green beans and the generic variety offered by your grocery store. Use this opportunity to teach your children how to shop for value. Present them with two identical groceries—for example, an expensive name-brand jar of peanut butter and a more affordable generic variety—and ask them which one sounds like it would be a better deal. For bonus points, use this exercise while they are learning basic math, because they will find the subject more interesting (or at least less boring) when they understand how it applies to their life.

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    For a list of cheap and healthy foods, grocery savings tips, and a full-length shopping list you can print and take to the store or download to your phone, click here.

    It’s easy to end up with a spoiled child who doesn’t appreciate anything if you let them have everything they want. Follow these seven tips to raise your child in a positive way that helps them become a fiscally responsible adult.

    Are there any extra tips you would add to this list?

    Feel free to pass this article along to any parents you know who might be helped by it!

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    Daniel Wallen

    Daniel is a writer who focuses on blogging about happiness and motivation at Lifehack.

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    Last Updated on August 20, 2019

    How to Set Financial Goals and Actually Meet Them

    How to Set Financial Goals and Actually Meet Them

    Finances can push anyone to the point of extreme anxiety and worry. Easier said than done, planning finances is not an egg meant for everyone’s basket. And that’s why most of us are often living pay check to pay check. But did anyone tell you that it is actually not a tough task to meet your financial goals?

    In this article, we will explore ways on how to set financial goals and then actually meet them with ease.

    5 Steps to Set Financial Goals

    Though setting financial goals might seem to be a daunting task but if one has the will and clarity of thought, it is rather easy. Try using these steps:

    1. Be Clear About the Objectives

    Any goal (let alone financial) without a clear objective is nothing more than a pipe dream. And this couldn’t be more true for financial matters.

    It is often said that savings is nothing but deferred consumption. Therefore if you are saving today, then you should be crystal clear about what it is for. It could be anything like kid’s education, retirement, marriage, that dream vacation, fancy car etc.

    Once the objective is clear, put a monetary value to that objective and the time frame. The important point at this step of goal setting is to list all the objectives, however small they may be, that you foresee in the future and put a value to it.

    2. Keep Them Realistic

    It’s good to be an optimistic person but being a pollyanna is not desirable. Similarly, while it might be a good thing to keep your financial goals a bit aggressive, going out of the line will definitely hurt your chances of achieving them.

    It’s important that you keep your goals realistic in nature for it will help you stay the course and keep you motivated throughout the journey.

    3. Account for Inflation

    Ronald Reagan once said – “Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hitman”. And this quote sums up the best what inflation could do your financial goals.

    Therefore account for inflation whenever you are putting a monetary value to a financial objective that is far away in the future.

    For example, if one of your financial goal is your son’s college education, which is 15 years hence, then inflation would increase the monetary burden by more than 50% if inflation is mere 3%. So always account for inflation.

    4. Short Term vs Long Term

    Just like every calorie is not the same, the approach towards achieving every financial goal will not be the same. It is important to bifurcate goals in short term and long term.

    As a rule of thumb, any financial goal, which is due in next 3 years should be termed as short term goal. Any longer duration goals are to be classified as long term goals. This bifurcation of goals into short term vs long term will help in choosing the right investment instrument to achieve them.

    More on this later when we talk about how to achieve financial goals.

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    5. To Each to His Own

    The journey of setting financial goals is an individualistic affair i.e. your goals are your own goals and are determined by your want to achieve them. A lot of times we get on the bandwagon of goal setting only to realize later on that it was not meant for us.

    It is important that your goals are actually your goals and not inspired by someone else. Take a hard look at this step at all the goals you’ve set for after this step, you will be on the way to achieve them.

    By now, you would be ready with your financial goals, now it’s time to go all out and achieve them.

    11 Ways to Achieve Your Financial Goals

    Whenever we talk about chasing any financial goal, it is usually a 2 step process –

    • Ensuring healthy savings
    • Making smart investments

    You will need to save enough; and invest those savings wisely so that they grow over a period of time to help you achieve goals. So let’s get down to ensuring healthy savings.

    Ensuring Healthy Savings

    Self realization is the best form of realisation and unless you decide what your current financial position is, you aren’t heading anywhere.

    This is the focal point from where you start your journey of achieving financial goals.

    1. Track Expenses

    The first and the foremost thing to be done is to track your monthly expenses. Use any of the expense tracking mobile apps to record your expenses. Once you start doing it diligently, you would be surprised to see how small expenses add up to a sizeable amount.

    Also categorize those expenses into different bucket so that you know which bucket is eating the most of your pay check. This record keeping will pave the way for cutting down on un-wanted expenses and pump up your savings rate.

    2. Pay Yourself First

    Generally, savings come after all the expenses have been taken care of. This is a classical mistake which almost everyone of us do. We pay ourselves last!

    Ideally, this should be planned upside down. We should be paying ourselves first and then to the world i.e. we should be taking out the planned saving amount first and then manage all the expenses from the rest.

    The best way to actually implement is to put the savings on automatic mode i.e. money flowing automatically into different financial instruments (for example – mutual funds, retirement corpus etc) every month.

    Taking the automatic route will make us lose control of our money and hence will compel us to manage in what’s left with us thereby increasing the savings rate.

    3. Make a Plan and Vow to Stick with It

    Budgeting is the best to get around the uncertainty that financial plans always pose. Decide in advance how spending has to be made.

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    Nowadays, several money management apps and wallets can help you do this automatically. It’s easy and who knows, you may just end up doing what people fail to do.

    At first, you may not be able to stick to your plans completely but don’t let that become a reason why you stop budgeting entirely.

    Make use of technology solutions you like. Explore options and alternatives that let you make use of the available wallet options and choose the one that suits you the most. In time, you will get accustomed to making use of these solutions.

    You will find that they make it simpler for you to follow your plan, which would have been difficult otherwise.

    4. Rise Again Even If You Fall

    Let’s be realistic. It’s not like the world will come to an end if you made one mistake. This isn’t called leniency but discipline.

    If you fail to meet your budget for a month, don’t give up the entire effort just like that. Instead, start again.

    Remember that flexible plans are the most realistic plans. So go forward and try to follow your financial goals as planned but if for some reason, the plan gets out of hand for you, do not give up on it just yet. This has a lot to do with your psychology rather than any material commitment.

    All you have to do is to stay on the road and vow to stay on it, no matter how much you fall down.

    5. Make Savings a Habit and Not a Goal

    In the book Nudge, authors Richard Thaler and Cass Sunstein advocate that in order to achieve any goal, it should be broken down into habits since habits are more intuitive for people to adapt to.

    Make Savings a habit rather than a goal. While it might seem to be counter intuitive to many but there are some deft ways of doing it. For example:

    Always eat out (if at all) during weekdays rather than weekends. Usually weekends are expensive. Make it a habit and you would in turn be saving a great deal.

    If you are travelling buff, try to travel during off season. Your outlay will be much less.

    If you go out for shopping, always look out for coupons and see where can you get the best deal.

    So the key point is to imbibe the action that results in savings rather than on the savings itself, which is the outcome. Focusing on the outcome will bring out the feeling of sacrifice which will be harder to sustain over a period of time.

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    6. Talk About It

    Sticking to the saving schedule (to achieve financial goals) is not an easy journey. There will be many distractions from those who are not aligned with your mission. And it would be rather easy to lose the grip over your discipline.

    Therefore in order to stay the course, it is advisable that you keep yourself surrounded with people who are also on the same bandwagon. Daily discussions with them will keep you motivated to move forward.

    7. Maintain a Journal

    For some people, writing helps a great deal in making sure that they achieve what they plan.

    So if you are one of them, maintain a proper journal, where you write down your goals and also jot down the extent to which you managed to meet them. This will help you in reviewing how far you have come and which goals you have met.

    Use this journal to write down all essential points such as your short term, mid term and long term goals, your current sources of income, your regular expenses which you are aware of and any committed expenses which are of recurring nature.

    When you have a written commitment on paper, you are going to feel more energised to follow the plan and stick to it. Moreover, it is going to be a lot more easier for you to follow you and track your progress.

    At this point, you should be ready with your financial goals and would be doing brilliantly with savings; now it’s time to talk about the big daddy – Investments.

    Making Smart Investments

    Savings by themselves don’t take anyone too far. However savings when invested wisely can do wonders and we are at that stage where we will talk about making smart investments.

    8. Consult a Financial Advisor

    Investments doesn’t come naturally to most of us therefore rather than dabbling with it ourselves, it is wise to consult a financial advisor.

    Talk to him/her about your financial goals and savings and then seek advice for the best investment instruments to achieve your goals.

    9. Choose Your Investment Instrument Wisely

    Though your financial advisor will suggest the best investment instruments, it doesn’t hurt to know a bit about them.

    Just like “no one is born a criminal”, no investment instrument is bad or good. It is the application of that instrument that makes all the difference.

    Do you remember we talked about bifurcating financial goals in short term and long term?

    It is here where that classification will help.

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    So as a general rule, for all your short term financial goals, choose an investment instrument that has debt nature for example fixed deposits, debt mutual funds etc. The reason for going for debt instruments is that chances of capital loss is less as compared to equity instruments.

    10. Compounding Is the Eighth Wonder

    Einstein once remarked about compounding,

    Compound Interest is the eighth wonder of the world. He who understands it, earns it… He who doesn’t… Pays it.

    So make friends with this wonder kid. And sooner you become friends with it, quicker you will reach closer to your financial goals.

    Start investing early so that time is on your side to help you bear the fruits of compounding.

    11. Measure, Measure, Measure

    All of us do good when it comes to earning more per month but fail miserably when it comes to measuring the investments; taking stock of how our investments are doing.

    If there is one single step where everything (so far) can go wrong, it is at this step – Measuring the Progress.

    If we don’t measure the progress timely, then we would be shooting in the dark. We wouldn’t know if our saving rate is appropriate or not; whether financial advisor is doing a decent job; whether we are moving closer to our target or not.

    Do measure everything. If you can’t measure it all yourself, ask your financial advisor to do it for you. But do it!

    The Bottom Line

    This completes the list of tips for you to set financial goals and actually achieve them with not so great difficulty.

    As you can see, all it requires is discipline. But guess that’s the most difficult part!

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    Featured photo credit: rawpixel via unsplash.com

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