Corralling the kids to school and making sure they finish their broccoli is already a full-time job, and lumping the responsibility to tutor them about money matters sounds like hamstringing an already Herculean task. But hold up! Ignoring this pivotal aspect gives peer pressure and social media influencers free rein on their financial knowledge. And with the world of finance being as complex as it is, it’s time we take the reins back and help our kids grow into financially savvy individuals who can conquer the future. Here are 11 tips to make this daunting task a breeze.
Lessons for Tiny Tots and Swift-footed Schoolers
Why wait until your child can drive to talk finances? Even your toddlers can understand the cardinal rule of commerce — if you want something at a store, you need money to pay for it. Here are the steps to walk those tiny steps into the world of finance:
1. Pave the Way for Open Dialogues
No, you don’t need to disclose how much the house cost or what your salary is. Discussing money matters in an appropriate manner breaks the taboo, invoking curiosity and making them comfortable to discuss it as they encounter its complexities in life.
2. Decoding ‘Wants vs. Needs’
Your child might want the entire Eddie Bauer store, but you need to set them straight that what they want may not necessarily be what they need. Use real-life instances to show the difference between necessities like healthy food and wants like the newest gaming console. This lays the foundation of their financial journey based on needs first, and then wants.
3. The Magical Power of Pocket Money
While you might be buying everything they need at this age, you don’t have to do the same for their wants. Pocket money introduces them to the concept of decision-making – whether they want to spend, save, or do both. And they might run out of money which isn’t bad. That’s the time life lessons are learned.
4. Their Fort Knox – The Piggy Bank
A physical piggy bank serves as an interesting financial tool for kids. It’s like a visual aid for comparing their saving habits.
The Tween Arena: Mid-Elementary and Middle School
As the kids grow, so do their responsibilities and understanding. You can expand on their basic knowledge about money into something more practical. Here’s how:
5. Encouraging Savings
Patience is a financial virtue, especially when it comes to saving for a big purchase. Encourage them to stick to their saving goals and discuss how different purchasing decisions will impact their timelines. Teaching them the concept of opportunity cost where if they purchase item X, they won’t have enough for Y, is one of the greatest financial lessons they could learn.
6. Earning Opportunities at Home
Your home can act as a mini employment agency where they can engage in jobs to earn money. This prepares them for the realities of a working world where one needs to work to earn that paycheck.
7. Opening a Bank Account
When they start earning and saving in a structured way, it’s time for them to enter the banking system. You can be a joint account holder till your child turns 18.
The Big Boys’ Club: High School
Entering high school is like unlocking a new level in a video game. Here are some valuable lessons that will prepare them for their future financial endeavors:
8. First Tree, First Fruit: Their First Job
At this stage, they are ready for a after-school job. This is a golden time to unravel the enigma of payroll taxes, income tax, and other deductions that come slip.
9. The Art of Budgeting
Show them how to chalk out a budget, divide it according to necessities, discretionary spending, and big-future-purchases that they’ve been saving for. This empowers them to prioritize their expenses, live within their means, and make informed decisions.
10. The Masterstroke: Investing
The power of investing and compound interest could now be introduced to them, shedding light on how their money could multiply over the long term.
11. Introducing Credit
Your child should know the importance of credit, how it can influence their ability to secure loans or credit cards, rates of interest, and the impact on insurance premiums. This helps them avoid common errors made, such as accumulating high-interest debts and living beyond one’s means.
Final Thoughts
Raising your kids to be financially sound adults isn’t mere happenstance. It requires careful nurturing, guidance, and patience. Teach them early and they will carry these crucial lessons throughout their lives, standing them in good stead as they navigate their personal finance waters. So, fear not, empowering them with financial literacy is more of a bonding experience that paves the way for them to be responsible adults. Also, isn’t it nice to think that they might thank you for this in their victory speech?
Remember, it’s not only pennies that make pounds. It’s the right knowledge too.
