Raising a financially savvy generation is the responsibility of every parent. Here’s how you can help your children to be smart and financially literate with their money and learn the true meaning of financial responsibility.
The first thing to remember is that teaching your kids about money is a long-term game, there are no crash courses or shortcuts to help them understand the true meaning of economic success. This is something they’ll likely pick up over time (with your help) and can be an invaluable lesson on their journey to financial independence.
With that, here are three easy tips you can use at home to get your children financially literate so they don’t struggle later in life.
Showing is better than telling
Kids are remarkably good at picking up the things you don’t say. They observe your mannerisms and attitude, so teaching them about financial responsibility starts with setting a good example with your own spending habits. Try to avoid leaving large bills lying around the house or boasting about lavish purchases as this can undermine the value of saving. Make sure your kids understand that money is a limited commodity that needs to be rationed and secured. This also extends to how you talk about household finances with your partner while kids are present.
Start a secret piggy bank or savings plan
It can be hard for kids to understand the long-term benefit of saving, so doing it for them and then showing them the end result is a great way to build motivation. Whether you have adult children paying board or young kids collecting money for household chores, leaving a portion of it aside every month and then surprising them with a lump-sum is sure to lift their financial spirits for a big purchase or to continue and save for something much larger. Plus, it can teach them the discipline required to save up for high-ticket purchases or get them ready for an investment mindset.
Show them how to protect their assets
Insurance comes in many shapes and forms, and it’s not just a boring ‘adult thing’. Extended warranties or servicing agreements can be purchased with most electronic devices such as video games or headphones. These can be a great way to show your kids two lessons; the importance of paying a little extra upfront in case the unexpected happens, and that the true cost of any item includes a safety net to replace it. This is especially relevant for adult children buying their first car as their car insurance premiums should always be included in any budgetary discussions.
Teach them the value of money at Christmas
We often leave kids out of the budgeting, thinking ‘they don’t need to know’ about the finances as we are the one bringing in the money and doing the Christmas shopping without them, however there’s real value in allowing them to observe and participate in your discussions about the Christmas finances.
Not only do they learn how to apply budgeting skills in a real-world situation, they’ll experience the limited nature of money first-hand; and learn to allocate it accordingly.
So make a time to sit down as a family and talk through your Christmas spending. Set a spending limit for each gift recipient to help you stay on track. Remember that spending less on your immediate family means you’ll be able to give more generously to others – another valuable Christmas lesson for kids.
Show them the importance of giving to those less fortunate
Giving your time or money without expecting anything in return is the perfect way to embrace the spirit of the Christmas and to show your children that what they have or may take for granted isn’t the situation with everyone.
Teach them how they can donate their unused toys, or volunteer your time to help sort, pack or deliver food/meals to kids in need.
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Principal Financial Planner at RP Wealth Management | Financial Planning l SMSF I Insurance l Property Advisory. Our purpose is to provide our clients with sound advice and direction to assist with their financial affairs and help them make the best choices in achieving what is important to them.
