Dollars and Sense – Easy Ways to Teach Kids About Financial Responsibility
It’s best to teach kids about how to manage money from an early age, so that they can start to develop good habits that will serve them well throughout their lives.
Luckily this is also a fairly easy thing to do, so long as you take the right approach. To that end, here are some tips on imbuing your little ones with the right ideas about financial responsibility from day one.
When talking to kids about money, you don’t want to preach good practices without also following them yourself.
For example, there’s no point recommending that they save up their allowance to afford a big purchase if you’re then going out and getting a high interest loan, or using a credit card, to splash out on luxuries.
Likewise if you’re keen to show children how money can grow over time through investment, it makes sense to ensure that you’re also up to speed with the latest advice, and using cutting edge options for building a portfolio. You could try automated investing, and perhaps use this as a way to save for your child’s future, as well as your own.
Be open about your finances
Unless you’re regularly speaking with your kids about money matters, they won’t absorb anything useful. And since their brains are very much information sponges, you can make an impact by being open and honest with them about the ways of the world, even if it doesn’t seem like it’s having an immediate effect.
It’s a good idea to make sure that they understand the connection between what everyday items cost and your household budget, for example. Equating the expense of acquiring a new games console with the amount of groceries you could buy for the same amount, and explaining how it’s important for you to prioritize essential purchases over luxuries, will go a long way.
Spur them to seek out employment opportunities
As children get older, they’re able to get their first taste of the job market, and giving them the encouragement and ability to grasp these opportunities is useful.
Understanding that working for a living and being savvy with the cash you earn is better than getting by on parental hand-outs will stand them in good stead for their development into adulthood.
That’s not to say that you need to cut off their allowance as soon as they’ve got their first job, but rather that if you’re making things too cushy for them, they won’t be prepared for what lies in store when they leave home and need to fend for themselves.
Explore key financial concepts together
You don’t need to go all-out in discussing the intricacies of the finance world, but it will be useful to discuss basic ideas which everyone will encounter at some point in their lives.
Interest is a good example of this, and brings together other concepts like borrowing money and using credit cards.
It’s best to give practical demonstrations, rather than just talking things over. So you could offer to give them a small advance on their next allowance, on the condition that they’ll then need to forgo this amount plus a small percentage on top later in the month. Giving them their own tablet to help with calculations will make this less challenging.
The bottom line
Financial responsibility isn’t rocket science, although some people treat it as if it is, or like it doesn’t apply to them. To avoid your children falling into this category in the future, set a good example and speak to them frankly whenever money is up for discussion at home or in the store.
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