When I was a child, one of my favourite pastime activities was going through my parent’s wallet and purse. No, it was not to steal the money. It was due to my intense fascination with the cards, paper money coins and gazing at our ugly-duckling phase passport size photographs my father and mother had lovingly stuck inside.
Upon finding me surrounded by their driving licenses, pennies, and important business cards, they would reprimand me by giving me a stern lecture about the importance of money. During one such unbearably long lecture, I learned about the difference between credit cards and debit cards. At that time, it did not seem like a big deal, but the lesson remained forever ingrained in my memory. Of course, it took another few years to grasp the concept of how credit cards actually work.
As an adult, I am thankful to my parents for teaching me the basics of money management. I plan to do the same for my child when he is old enough. Parents do need to invest time into teaching financial responsibility to their kids. It will raise successful, independent, money-smart young adults.Do your children need money lessons? Here is how you can start! Click To Tweet
Do you have children who could use a few money lessons? Here is how you can start!
1. Teach Them the Basic Terms
I have come across many grown-ups who have no idea how to pay off their taxes. They assume it is a huge hurdle to deal with it and they let it pile up. When the notice arrives, they rush in panic and often end up suffering the consequences.
One of the best ways to teach your children is to involve them in everyday money talk. Ask them to help you out with home budgeting, tell them how to file the taxes, show them how you can gain reward points on a credit card and most importantly, why it is crucial to pay off the debts on time.
From credit and debit cards to taxes and mortgages, educate your child on the key terms of money management.
Some of the basic financial terms you can start with:
- Bank Accounts: Savings & Current accounts.
- Personal Loans
- Credit Scores
- Cheques and Payorders
Of course, the advancement of internet shopping and online banking has opened up a whole new field of further developments in how money works. At the relevant stage and age, it would also be wise to discuss how digital payment systems work, credit card security, how to keep their identity safe on online market places.
2. A Trip to the Bank
When I went to a bank for the very first time, I was puzzled. The eight-year-old me was not pleased to see people happily handing over their money. My piggy bank was enough for me and my humble pennies. After several years, when my parents helped me open my first account, I learned about savings, loans, and interests. It is not necessary to take your child to the bank, but it is essential to teach them how banks function. Tell them about different kinds of accounts you can open (current, savings), about interest rates and when and how to apply for loans. At the same time, drill discipline into their brains and explain the huge responsibilities money brings with itself.
3. How to Earn
Explain to your children how earning money works and discuss its different methods. Money doesn’t grow on trees (neither do they come from the hole on the wall!). They see the notes bursting from ATM and wallets and imagine there is an endless pile. Explain to them the concept of jobs, services, and payments.Children often take money for granted. Teach them to earn and grow money. Click To Tweet
That as an adult, they will have to secure a job to earn money. Start with your own job and tell them how you work for a few hours every day and you get paid a certain amount at the end of the month. Educate your child about types of contracts, and how each job requires a different set of skills.
It may also help to make the experience ‘real’ by setting aside, money to earn each week from their weekly chores. If they desire a new toy or gadget, perhaps a good way to teach value is to ask how they will be able to afford it, and perhaps help them earn some money towards it, whether with a paper round or by busking at a tourist spot.
4. Develop Budgeting Skills
When my husband and I sit down to budget, a long grilling session follows. We absolutely hate it and we are rather poor at managing our daily expenses. Well, we are still learning but you can teach your kids right from the beginning. From buying monthly groceries to purchasing Christmas presents, involve your children in home budgeting and maintain their interest by asking their input from time to time.
You never know they may have an excellent idea to solve your budgeting woes! Encourage them to create shopping lists and inform them the prices of each item. When they learn how much toothpaste cost, they might just stop ‘accidentally’ dropping it into the sink.
RELATED: 10 Realistic Budgeting Tips for a Stress-free Life [Colour My Living]
5. Needs vs. Wants
Children want an endless number of gadgets, toys, stationery, and junk food. Their wants and desires never seem to stop. They want to go to an amusement park in the middle of the night, they want to slosh their pasta in mayonnaise and they want to build an empire out of Lego blocks. Well, some of the wants are fair enough.
But how about the times when they throw a tantrum in public because a parent can’t meet their unreasonable demands? When they whine for more money to buy a better mobile phone? When they want to borrow money because they ended up splurging their allowance on a ridiculously expensive pair of sunglasses?
Children, especially teenagers, need know the difference between wants and needs. They need to learn that they are not simply entitled to money; that money is a privilege they must earn. They need to know that when you receive money, you are not supposed to spend all of it at once.Need it or want it? Teach your child that money matters. Click To Tweet
6. Investments for Starters
Up until the age of 25, I was clueless about stock market. I knew my father had some shares he wanted to sell off and that my husband-to-be spent his mornings hastily going through the stocks. I wanted to learn about it and was amazed at how much potential it held. I was ready to invest my hard-earned bucks into it.
That said, every investment has its risks. It is crucial for parents to teach their children the basics of investments and how to make smart decisions. Whether it is a property, stocks, or a business, by the age your child is a young adult, they must be able to differentiate between smart and dumb choices. Smart investments can go a long way and has a potential to change your kid’s future.
7. The Art of Growing Money
If you want to inspire your child to save and grow money, tell them the story and secrets of Warren Buffett, the richest man in the entire world. He has motivated a lot of people to get their lives back on track. His personal financial tips are considered some of the best money advice.
- Don’t spend but reinvest your profits
- Don’t follow the crowd; make your decisions on what you think is best for you in the future.
- In his words,’ Don’t suck your thumb’. Be swift to make up your mind.
- Don’t live on credit cards and loans.
- Don’t measure your success by the number of dollars in your bank account.
8. Understanding Value of Money
Children often take money for granted. They may have an idea on just how valuable money is, but it will take time for them to learn the hard work behind earning each penny. From the start, don’t allow them to develop a habit of ‘borrowing’ money. Assign them pocket money and stick to it. If they end up spending all of it, don’t just hand them more notes.
Enlighten your child about the dangers of debt and the importance of savings. Children must learn that money is not just for spending purposes solely. Money needs to be saved, grown, and kept aside for rainy days. Loans should only be taken out if absolutely necessary and even then only for important causes such as for buying a house or paying college fees. They are not meant for luxuries you can’t afford, like a weekend in Ibiza. Moreover, loans must be paid off in time otherwise there are serious consequences to face, like bankruptcy.
9. Money Comes and Goes
When my 5-year-old niece asked me for yet another set of puzzles, I brushed her off by telling her I was out of money. Her reply was simple enough, ‘Just go to the bank. They will give you big bundles of money’. It took some patience (mainly on my side) and dozens of questions from her to understand how money actually works. To her dismay, there was no tree bearing money notes and pennies inside the bank.
Money isn’t infinite and time changes. In our desire to give our children the best that we can and that they deserve, this means that children are often used to getting what they want. As a parent, it is your job to enlighten your children about the realities of life. If you are going through financial troubles, don’t cover it up. Involve your kids in some of your discussions so that they have an idea what is going on.Involve your kids in budgeting... they will learn the basics of money management. Click To Tweet
10. Money is not everything
So much of our lives revolve around money. Ultimately though, it is simply a convenient means for exchange – being able to pay for goods and services without first needing to make something to barter.
It is important to temper lessons on money with the emphasis on how money is a tool and life itself demands a greater, wider perspective. We all know of friendships, relationships, even families that fall apart because of greed and desire for more money and wealth. It is worth discussing these situations and sharing thoughts and opinions.
Children are smarter than we think, and they can learn to manage finances from a young age. Start from the basics. Let them handle the routine financial tasks such as budgeting and managing allowance and then move on forward from there. Once you have set up a strong foundation, they won’t have trouble maintaining their finances in the future.