Do you want your children to manage their finances smartly in the future? Wondering how and when to train your children to become financially responsible? This post is a must-read for you as we share the best tips and strategies to train kids with finances.
However, the first thing we need to get out of the way is when is the right time to train kids about the value of money? Well, you can do this at any age. The earlier you start, the easier it will be for you to inculcate good financial habits in your children.
A study conducted by the University of Cambridge showed that children develop their financial habits by seven. So, give your children a financial head start by following the tips shared below by our team of experienced financial advisors.
Explain the Money Concept
To make your little ones financially responsible, you will first have to teach them the basics:
· What is money?
· How is it earned?
· The value of money and savings.
· Discuss the concept of spending and savings and how to make different financial decisions in life.
Give Them Allowance
Teaching and practicing go hand-in-hand. Thus, when teaching them about money, you need to make sure that they have money in their hands so that they can apply what they have learned. There are two ways to do this:
· Give them a monthly allowance
· Teach them ways to earn
When they have money in their hands, they will understand the concept of budgeting and develop rationing skills better. It will help them make informed choices with their money. Also, as they continue to manage their allowances, it will further improve their money management skills.
If you’re among those who don’t like to give children allowance but instead want them to work hard to earn dollars, then find or suggest jobs that can help them earn good money. Your child doesn’t always have to start out big; a simple lemonade stand is good enough to teach them the idea of making money. However, if you want to be more creative and want them to think beyond that, then you can suggest the following ways to earn money.
Depending on the age of your child, here are some jobs that offer good money. These are:
· Pet sitting for vacationing neighbors
· Organizing a garage sale
· Shoveling clear driveways for neighbors during winters
· Washing cars
· Collecting recyclables
· Tutoring, etc.
Open a Savings Account or Get them a Piggy Bank
Once your children begin to get allowances or earn money, introduce the idea of keeping that money properly in a safe place so that it grows. Small children are likely to lose their money so it is essential to guide them about where to put their money.
Early training in categorizing money establishes patterns for future money-management behavior. Introduce children to the concept of dividing their money into categories: save, share and spend. Engage them in activities to make them understand that money is limited in quantity and must be divided for different purposes.
Therefore, start by opening a savings account or a piggy bank. Encourage your children to keep the money that they want to save in the account and watch it grow. Alternatively, you can just put it at home in a piggy jar. Make sure that the piggy bank or jar is clear so that your children can watch their money pile up and grow as they save.
Moreover, you can also encourage them to put the money in long-term assets like stocks. This is a great way to teach them to save, invest and grow money over time.
Get Your Children Involved in Charitable Giving
When training kids with finances, encourage generosity and kindness. You can do this by encouraging charitable giving so that they save money for their personal financial goals and remain humble and kind to people less privileged.
Discuss Financial Goals and Strategies to Make Successful Long-Term Plans
Many successful financial milestones are achieved by setting goals. Thus, we recommend parents encourage their kids to set savings goals and work towards them. Once your children set targets, assist them in strategizing a roadmap for achieving them. Goals are variable from individual to individual and age.
For example, if your child is around seven or ten, his goal is likely to be to buy his favorite toys. But if your child is a young adult, they might have goals like buying a car/bike, traveling to their favorite holiday spots or even buying a house. No matter what their goals may be, support them, encourage them and help them strategize for success.
Also, teach them to work hard towards their goals with complete focus and no distraction. Train them to work hard to build their equity. It could be through employment or starting their business or by diversifying their investment portfolio. Explore the ideas of mutual funds and stocks to invest their money so that it grows faster and your kids can buy what they aspire to.
Help Them Make a Budget Together
This is yet another way to develop financial skills and good habits. As they learn to budget, they will never spend their hard-earned money without thinking. Budgeting will teach your children to control and curtail expenditures and spend only what is needed—nothing extra.
Make them understand the concept of the opportunity cost of spending money. This will help them save enough money for other things and keep moving positively towards their set targets.
To learn more tips or for assistance and guidance on training kids with finances, feel free to contact us. We can help.