We all want our kids to lead a financially fulfilling life. However, are we doing enough to upskill them to manage their money? Most parents want to provide financial education and money management skills to their kids. But how do we begin with financial education and what is the right way to go about it?
A study from the University of Cambridge showed that money habits in kids are developed as early as seven years of age. Their observant eyeballs are intrinsically watching monetary transactions that their parents are making in their presence. Under favourable circumstances, if you take a deliberate step to involve them in certain money conversations, that can give them a head start.
Although it’s unlikely for children below the age of seven to understand finances and the concept of money wholly but if introduced through personal economic experiences, they tend to develop a sound understanding. That understanding is mostly related to how effective it is and how it’s done.
You can begin your child’s journey towards financial education by helping them observe and calculate monetary exchanges from an early age. You can go a step further and ask for their opinion when you’re about to make a purchase, regardless of whether it is big or small.
To help you help your child understand finances and learn money management, here’s a guide that you can refer to:
Introduce The Concept of Money
The first step you can take is to introduce to your kid to coins when they’re young. Build a habit for them to save money or collect coins in a piggy bank that is clear so they can see the money grow. This will help them understand the basics of money and how it grows when saved.
Lead By Example
Do not keep your child from observing your activities related to monetary exchanges. For instance, if you’re writing a check or withdrawing money from the ATM or even paying for groceries, explain to them what you’re doing.
As we know that kids are great observers, lead by example when it comes to money management. If you have a habit of making impulse purchases, you’re kid’s likely to pick up similar tendencies.
Open A Savings Account
If you’ve already introduced the concept of saving money to your child through collecting for piggy banks, this is going to be pretty easy. You can explain to them the concept of compound interest and how money grows in the bank.
Use An Allowance
When your child reaches a certain age where they understand money, you can begin to provide them with a monthly allowance. You can either make them earn it by letting them do some work for you or you can simply give it to them. The idea here is to teach your child money management. As long as they are learning about finances and gaining a better understanding of money, your job is done.
Make Learning Fun
Learning isn’t always fun unless you make it interesting. To teach money management you may play money games that interests your child. There are plenty of board games and online games that help in making financial education fun. You can even create your own game.
Allow Them To Make Mistakes
Even as adults, we make mistakes with our money and we learn from them. Allow your kids to make mistakes as well when they spend their own money. Give them the benefit of doubt that they’ll learn from their mistakes.
However, money is a powerful tool and when young people use it, it is advisable to parents to keep an eye on their activities. Step in when you feel it is necessary.
Let Them Earn Money
When your child begins to reach their early teens, you can help them understand the importance and joy of earning money and how the real world works. Whether it’s working a summer job or becoming a lemonade-stand entrepreneur or even working for you for that matter, let your kids earn for themselves.
Now, as your kid starts to grow and understand more about money and finances, you can then begin to introduce them to concepts like budgeting, credit, taxes, financial planning and investing in a suitable order.
Besides making your child financially literate, you may also want to keep them humble by encouraging charitable activities as early introduction to money can also make them money-minded. A perfect balance between humility and money management would help your child evolve into an individual with great skills to lead a wealthy and happy life.