Teach Your Children To Be Money-Savvy

It is a fact of life that money is something we will all have to deal with over the course of our lifetime...Unfortunately, many of our children are woefully unprepared for this reality. 

While most parents recognise the importance of discussing school subjects such as math, history, and science - they are far less likely to spend time discussing financial matters and this is a HUGE mistake.                     

It's never too early to start teaching your child about the value of money and how to be smart with it. In fact, the earlier you start, the better. Here are a few tips on how to get started.

1. Start them early

Introduce your child to the concept of money at a young age... It could even be as simple as a piggy bank that they can start filling with their allowance or money earned by doing chores at home or odd jobs for other family members.

Discuss their financial goals; whether they're saving up for a toy they've been wanting for ages, or funding a trip to visit Grandma, discuss their reasons for wanting to achieve this goal and how much money they'll need to save.

This will enable them to develop the notion of 'value' and how purchasing something may cost more than just money, but also time - which is just as important an lesson for children to learn early on.

2. Explain the value of money

Help them understand why it's important to save and spend wisely to ensure your child understands the value of money.

Encourage them to think about their purchases (helpful hint: Children usually understand this much better if you point out why they may want something, rather than just telling them not to buy it).

Explaining it in terms that are based in their reality is much more effective than applying an adults logic to it.

Discuss the importance of delayed gratification with them, (ie. deciding that once they've achieved one goal, like saving up for a toy or trip somewhere, it's time to set another goal).

3. Open up a savings account

Opening a savings account at an early age will help your child develop strong financial habits.

It's also a good idea to teach them how to deposit and withdraw money, so they start getting the hang of it before they actually need it - this will help avoid any 'sticker shock' when they realise you can't just take money out whenever you like!

You could even open an account for them and let them watch as you make regular deposits and withdrawals so they can see the process in action.

4. Give them an allowance

Allowance is another important step in your child's financial education...It gives them control over their own spending, which teaches responsibility and helps instill good spending habits that will serve them well throughout their lives.

Be sure to talk to your child about what they plan on doing with their allowance

5. Teach them how to budget (especially with older children)

Once you have agreed to give them an allowance, now would be the time to teach them how to budget the money they receive - and the best way to do it is to give them a 12-month calendar and let them allocate how much they will spend each month.

This will give your child ownership over their own finances - rather than just handing cash over, this will teach them about long term financial goals.

Once your children reach middle school age , you should also talk to them about what they'd like to eventually do when they finish high school.

If your child is thinking of attending university after high school, you can discuss the pros and cons of student loans with them so they understand the impacts debt would have on their lives... And how it's not always a bad thing!                        

4. Show them how to make smart investments

Explain the importance of compound interest and saving for retirement to your child early on so they understand how it all works.

It will help them start to think about the kind of lifestyle that they want in their future and what sacrifices need to be made, now ,to ensure that they're financially stable by the time they reach retirement age.

This is where you can whip out the piggy bank and show them that every time they add to it, they're compounding their savings and raising their chances of achieving financial freedom in the future.

5. Help them learn about consumerism and debt

Once you start teaching your child/children about money, a huge chunk of that  chat should be about credit cards, loans, and mortgages.

Although your child may not understand this now, it's important to show them why taking out loads of debt is never a good idea.  

Explain the concept of interest to them at an early age so they start to think about their future and how much money they will need if they want to travel or study later on.

This is also the time you should introduce them to the concept of credit cards because 80% of people under 35 have one.

It is perhaps the one thing that can get you into really hot water, even at a young age!

Credit card debt can be a bit of a necessary evil - they are a great way of building up your credit score IF used correctly.

If not, it's not something to be proud of - especially when only 1 in 5 people actually pay off their balance every month.           

6. Teach them about charity

Introducing charitable giving at an early age is a great way to teach children the importance of giving back to society, as well as teaching them about empathy.

Introduce philanthropy into your child's life by talking about ways that you could help those less fortunate than yourselves - or if you can't actually donate money or items then explain why not, and talk through some other options for helping out...Volunteering is a fantastic way to make a difference to others.

7. Educate yourself on personal finance (with or without them)

As much as it's important for you to teach your children about money, it's just as important that you educate yourselves in this area, too.  

This way, you're setting an example for your kids by showing that learning about finances is a never-ending process that will benefit you and them over time.               

8. Celebrate their successes

Be proud of your child when they learn how to manage money well!

Your child's success is your success too, so give them a big pat on the back or a kiss when they get something right.  

And don't forget to have fun while you're talking finances with your kids!

Wrapping Up:

One of the best ways to teach your children about money is to show them what you do with it.

This way, they'll be able to learn from your mistakes as well as see how you can make smart investments and save for retirement.

In order for this strategy to work, however, it's important that you keep up a good example yourself by educating yourself on personal finance topics such as credit cards or mortgages so that you're setting an example for their future financial success!