Disclosure - This is collaborative post
Many grown adults become poor money managers largely because they mimicked the behaviour of their parents and lacked any sound teachings about money. Even in our school systems, while mathematics has a strong focus, it’s usually not given a practical basis by balancing a cheque book, learning to use a smartphone app on personal finance, or understanding a bank statement. To set your child or children up for success, here are a few useful money lessons.
Earned Money, Not Pocket Money
Let your kids learn that they do not rely on handouts. Instead, let them perform small chores around the house. That might be tidying up their room for the younger kids and mowing the lawn and cutting the shrubs for the teenagers. Make sure they perform these chores safely, and make the earned money proportional to both their efforts and their age.
Encourage Kids to Save
Having them set aside a percentage of what they earn through their chores teaches them about:
The usefulness of percentages
The value of savings
Delayed gratification
Delayed gratification is particularly important. They may wish to save up for a special toy or a bicycle, in which case they’ll need to save part of their pocket money and put off some other purchases to do so. This will be difficult at first, but it will make them want the item they’re saving for even more.
Teach About Budgets
Budgets are particularly important. They help balance the income with the expenses to avoid overspending.
Budgeting and Saving Allow for Fun Purchases
Having a sensible budget and keeping spending in check allows a person to save money. When wanting large purchases like a trip away, a car, or a home, the ability to manage a budget and save from their income will be useful life lessons.
Give Each Child Responsibility for Some of the Family Budget
Let your children each have responsibility for
small segments of the family budget. For younger children, that could be vegetable or fruit shopping. Set them up with a budget and the instruction to purchase as much as possible within that budget. Then walk them through the process.
With older children, expand the responsibility little by little and give them exposure to different types of spending and different decisions that need to be made.
Include the Kid(s) in the Money Decision Process
When they’re old enough to compare one price to another, give them the chance to look at how you decide about insurance.
Explain that you purchase insurance to protect against damage to the house, the car, and other valuable things. For a relatively small amount, the insurance will cover a reasonable amount of the value should something go wrong. Once this is done, let them
compare insurance to see what you should decide to do.
Also, help them to understand that a trustworthy brand is good and to not always choose the cheapest price. A strong company matters too, so the insurance company pays out.
Many parents make the mistake of treating money as a taboo subject never to be spoken about. However, this leaves each child with an at arm’s length understanding of financial matters which stands them in poor stead for their future. Instead, build their knowledge over the years, so they’re comfortable and knowledgeable about the subject of money.
Michelle
