“Money is what makes the world go round,” I believe we can all agree.
Money is still a taboo subject, and personal finance has yet to make its way into the curriculums of our country’s schools and institutions. In terms of real-world schooling, this is a significant conflict of interest.
According to various studies, pre-schoolers were able to understand the ideas of money and finance with each. This says a lot because most individuals today are unable to.
If you believe that protecting your children from financial realities and living in denial is excellent parenting, keep in mind that the apple does not fall far from the tree. You may be contributing to the development of a comparable adult who will make the same financial blunders you did. You should reevaluate your attitude since you may be robbing them of crucial financial skills that they will need later in life.
Personal finance is one of the most valuable life skills that a child can learn, and it is never too early to begin. Let’s look at some approaches to instil good financial habits in our children.
1. Discuss money:
Money perception and thinking have a major impact on our lives and are intimately linked to wealth. What we see, hear, and experience as children influences how we interpret money.
Children see everything as they grow up, from how purchasing decisions are made to how their parents react to difficult financial situations. Most parents unknowingly transmit powerful money messages to their children without comprehending the impact on their lives.
The easiest method to cope with this is to break the ice around money and talk to your children about how and why certain financial decisions are made.
One practical opportunity to teach this is during family market outings, where one may educate the youngster how to compare things, determine which products are overpriced, underpriced, or on the money, and finally, how to make a decision.
2. Make them work for it:
“Money doesn’t grow on trees” is one of the most important and difficult financial lessons to teach your children. The link between effort and money must be created at a young age so that your children can distinguish between entitlement and accomplishment.
Instead of giving in to your children’s demands, put them to work and make them earn it. Teach children that the actual world operates on the idea of ‘Quid Pro Quo,’ and that one must labour or do something in exchange for the things they desire.
Instead of simply handing them an allowance, assign age-appropriate domestic activities such as watering plants or cleaning their room and reward them appropriately.
3. Allow your children to make errors:
Not all purchases made by your children with their earned allowance will be considered sensible purchases, but it is critical that they make mistakes and learn from them. Children will make poor decisions, but you must teach them that money does not flow from their parents’ wallets.
Instead, you have to work hard to get it, and when it’s gone, it’s gone, so you have to make wise choices. This will also teach kids the value of patience and budgeting their money over the month rather than spending it all at once on something they don’t really need.
It is preferable for them to make tiny, inexpensive mistakes early on rather than a large, costly mistake later on. Tears shed today will save many tears later in life.
4. Teach your children to save money:
Saving money is a discipline, and it is critical that parents instil this practise in their children. Here, parents must guide their children by setting an example through their own saving practises, demonstrating to them how self-control may be beneficial in the long run.
Most parents start a savings account for their children as soon as they are born, if not sooner. All cash gifts given to the child go toward establishing a solid financial foundation for his or her future. Similarly, children should be taught to save a portion of their allowances as a nest egg or an emergency fund for the future, whether it is close or far.
5. Money draws more money:
Parents encourage their children to save, but it is usually motivated by the desire to buy bigger and better items. What must be taught is that all savings do not have to be spent and can instead be put to work to build additional wealth.
A standard savings account can serve as a simple example of how savings can yield extra money in the form of interest. Another approach is to involve students in the process of making real-world investment decisions. For example, inquire about their favourite cereal brand or restaurant, and inquire about the reasons why they would like to invest in those businesses/brands.
Most importantly, emphasise key concepts such as not putting all of your eggs in one basket and avoiding dangerous outcomes through diversification. For example, why should he/she not only gamble for their preferred brand, say Kellogs, but also be able to play against it by constantly modifying and balancing their investment spend on a competitor brand, say Chocos?
Also Read: How to save for college?