“It is important to know the value of a dollar.” I remember my parents telling me this (more than once) from a young age. Early on I had no idea what these words meant, but now, as I embark on the tumultuous journey to financial security, the time they took to teach me the fundamentals of managing money are invaluable.
In a rapidly changing world, educating children to become financially aware has never been more important. Early development of sound financial skills means they will be more prepared for the financial challenges of adulthood. In fact, researchers from the University of Cambridge reveal money habits are formed by the age of seven.
So, what can you do now that will help your children establish good money habits for life?
Tip 1 – Budgeting
Yes, this means pocket money. It helps kids to learn about income and expenses. There are smart phone apps that are engaging and allow them to track where their moneys coming from and where it is going to. Work out a saving target and have them try and stick to this over a period of time. Involving kids in discussions about the family budget is another way you to teach them about money. This helps give them the big picture about costs and spending. By explaining how much money your family has to spend every week and how this money is spent, kids will better understand the costs of family life and how much can be saved for other things.
Tip 2 – Comparative Shopping
Teach your kids how items are priced – that you can get cheaper or more expensive versions of the same product and that it is beneficial to shop around for the best price. When grocery shopping, involve your children by getting them to compare prices for you and pick the cheapest one.
Tip 3 – Invisible Money
In a time of credit cards, internet banking and online shopping, children don’t often see people buying products with physical money. It is easy for invisible money to be perceived as abstract and an unlimited resource rather than real money coming in and out of their family’s bank accounts. It is important to explain to your kids what a credit card is and how it’s different to a debit card, and how it impacts on your saving and your money management. Talk to your kids about money often to help them make this invisible money real.
Tip 4 – Involve Them In Real Life Situations
Teaching younger kids the value of money through real life situations will help them understand where money comes from and how it is earned. If you receive bills in the mail or online, this can be an opportunity to explain that electricity or your internet connection costs money. Explain that to pay a $400 power bill it took you so many days at work to earn the money. This will help create a connection between time spent at work and money, as well as the fact that electricity and the internet cost your family money. It might also make them think twice about leaving lights and appliances on.
Tip 5 – Create Knowledge, Awareness and Confidence
Financial knowledge is all about teaching kids to differentiate between good options and bad options, and above all, that they take control of their money. It also involves giving them the confidence to ask questions and arming them with the tools to avoid situations such as scams. If something seems too good to be true, it usually is.
Teaching children about money is an important. Learning how to put needs before wants, how far money goes, what to spend it on and how to save for those special somethings are skills that should be developed from an early age and fostered into adulthood.
If you do have any questions on financially educating your children, Accession3 Financial Advisers are here to help!
By: Taylor Riley