7 Tips for instilling financial responsibility in your kids
Money is involved in everything, including where we live, what we eat, what we wear, what we drive, health care, education, childcare, gift-giving, vacations, entertainment, air conditioning, and insurance. However, many parents need to assist their children in developing financial literacy.
Naturally, children will learn things even if you are not teaching them, and they will even acquire financial lessons even if you don’t actively teach them. Giving kids the gift of financial literacy at a very young age is important if you want to influence how they feel, think, and appreciate money.
1. Start early with the foundations
Starting a child’s financial education process as early as possible is best. According to a study, children’s money habits and attitudes are already developed as early as age seven. Thus, lessons should start earlier than that.
The early commencement of financial literacy in a child will not only help but will go a long way in enlightening them, especially if you begin to expose your children to money at an early stage.
Once they are old enough to understand that they shouldn’t be putting money in their mouths, you begin to explain what money is and its purposes. It works better if you explain how money works to them and give them the opportunity to see you making purchases with cash.
Even if you pay using a debit or credit card, explain what you’re doing with your money to your children. Show kids your receipts from the store; show them how much you have spent. Doing it over and over again becomes a habit for them. So when they grow older, they will begin to comprehend.
2. Create a savings habit
Early financial interactions with your children may also include purchases. They witness you making purchases with it, including ones for them. As a result, it’s critical to instill in children the idea that money shouldn’t just be used for purchases only, but also for regular savings.
Saving money is not merely a wise financial practice; it also teaches patience and delayed gratification. Aside from that, it also teaches how to set goals and make plans because it emphasizes being ready. For the fact that it promotes independence and security, it is important to give your children a piggy bank or savings container where they can put money to help them develop the habit of saving.
The act of saving should be accompanied by encouraging them with brief, straightforward messages like the following: Saving money is a wise habit, I love to save, and I feel good about saving money and building my future. In some cases, you could take your kids to an actual bank if they are old enough to graduate from a piggy bank, to help build exposure, alongside enlightenment.
3. Create chances to make money
Kids need their own money so they can practice making financial decisions, and in a bid to achieve this, it is important and advisable to give them an allowance. Parents should also normalize the act of making children earn their stipend by performing specific duties.
This way, the kids will have an understanding of how money is earned, and how much hard work is put into earning it. Tasks can be assigned to them to perform to earn their stipends. Although, there are some chores the kids have to do without pay, because they are expected to help as part of a family, if they want to get paid, they must complete specific tasks, which could be weekly, biweekly, or monthly, depending on their age.
4. Encourage children to make wise financial decisions
For kids to practice making financial decisions, they need their own money, and the best way to achieve this is by giving them a financial allowance. Consider making your kids work for their allowance by assigning them particular tasks to help them comprehend how money is earned, as mentioned earlier.
However, because they are expected to assist as a family, there are some chores they must do without being paid, but certain responsibilities must be completed before they are paid. The moment an allowance system is established for your kids, they will learn to live within their budget, which will also enable them to understand that money is earned.
When they spend their allowance lavishly, it is also crucial to let them know that their allowance is the only money they will receive, hence the call for them to be responsible and device a means or plan of how to manage it. Sometimes, they could be assisted in making money related decisions when their allowance has been given to them.
You can get three jars for spending, saving, and sharing; advise them to put some of their allowances in each jar, but don’t tell them the specific amount to put in each jar. They should be allowed to decide how much they want to put in each jar.
Additionally, teach your children that spending is about something other than getting what you want. It would help if they were made to understand that they will need to spend money on necessities once they are grownups and have the option to hire others to complete tasks for them. Therefore, if your children don’t perform specific tasks around the house that are required of them, it will cost them. This creates an awareness somewhere in their minds that there will be consequences for every decision they make.
5. Make giving a value for children
To share your financial principles with your children, it is crucial for you, as a parent, to teach them financial lessons. If you think giving to others is important, you may teach your kids to feel the same way by working with them to develop a practice of giving from an early age.
For example, you may build spending, saving, and donating jars, or you may assist your kids in creating a designated savings account for charitable donations. After that, assist your kids in organizing their giving by asking them which organizations or causes they wish to support.
6. Teach children how to grow their money
Saving money is a wise practice; you must teach your children about investing if you want them to understand how to accumulate wealth. You can set up a custodial investment account for each of your children because minors are not allowed to open their own accounts.
This will teach them at an early age how to accumulate wealth. Give them books that explain investing if you need more clarification on it yourself. This kind of book can be The Richest Man in Babylon, and reading that book can help one invest and spend less than one earns. Also, opening a custodial account can encourage your kids to start investing.
7. Display ethical financial conduct
How you talk about and handle money around your children is just as crucial when teaching them about financial literacy. For instance, you convey contradictory messages to your children if you spend too much money on irrelevant things. Instead, be careful to set an example for the attitudes toward money you want your kids to have.
Children need to see you make wise financial decisions if you want them to learn excellent spending and saving habits. In other words, put your words into action. Consistently preach! It can take some time to teach your kids about personal money. However, if you put in the effort and always convey a clear message about money, you will build beneficial behaviors in your children.