Tips to teach children about financial planning
In the age of digitization, kids are certainly aware of terms such as online payment, credit card, or debit card. They also see you use cards to buy groceries or other items when they go shopping with you. However, they have little to no concept of what’s actually happening. They will develop an understanding of the same when they experience financial responsibility.
But to wait till they grow up to take up this responsibility may not be the right way. If children do not learn valuable money lessons including the importance of budgeting and saving, they may struggle to manage their finances later in their lives. This outcome can be avoided if they are provided basic knowledge about money management at an early age.
Children usually learn about finances from the ways parents handle money, what and how they communicate, and the emotions they exhibit around it. Lessons about financial responsibility must begin at home and this should start when they are young.
So, here are a few tips for parents to teach children about financial planning:
1. Discussing financial health matters
Start by communicating with your kids about simple money topics at home. You can also seek out opportunities in your daily activities to turn routine money transactions into teachable moments for your children.
Of course, they are still young for in-depth financial lessons, but you can begin by teaching them essentials such as: earning, spending, saving, and donating.
Sometimes, you can also take them to a nearby bank and explain to them the role of a bank as a financial institution that keeps money safe, and its functions.
2. Teach them budgeting
Get your kids involved when you are creating your monthly budget. Explain to them the difference between what is necessary and what isn’t. This will help them develop smart spending habits.
Enlist their help in paying the bills, or let them plan a week’s grocery. Children learning the importance of making a plan on how to spend money will help them in the future when it comes to making big investments.
3. Instill in them the habit of saving
In addition to budgeting, saving is a habit that takes time to build. In the age of instant gratification, it becomes fundamentally important to explain to your children the need for saving. The better way to get them motivated is by helping them set a saving goal.
Therefore, having knowledge about savings and investments at a growing age will play a crucial role in lifelong money management. Once your kids have a saving goal in mind, you may gift them a piggy bank which will further instill the habit of depositing and saving.
4. Kids must know work is rewarding
It is best to consider young children lack the knowledge to differentiate between 10 and 100. Plus, a lot of them are unaware of how money transactions take place. They simply think money is for free.
It is, therefore, imperative children are taught that money is earned by the completion of a task. To do so, you can seek help from your kids by assigning them household tasks such as watering the plants or making their beds, etc.
Once the assigned task is completed, kids can be rewarded. This helps them realize that financial rewards are earned in exchange for performing well. Moreover, this practice will nudge them to pick up the necessary skills that will be helpful in the future.
As parents, we have aspirations for our children. We invest in their education so that they can get good jobs and live a secure life.
One of the aspirations must also include investing in teaching them money management so that they grow up to become financially independent adults.