The importance of teaching children to be financially wise cannot be overstated. The success in the life of children will at times depend on their upbringing. Many young homeowners attribute their success to the financial wisdom they attained in their childhood. Financial wisdom refers to the ability to manage money. Just like any other skill, money management is a learned trait. Parents that educate their children on money management set them up on a pathway to success in life while those that ignore this training set them up on a pathway of struggle. There are clear principles that a child can learn.
A Saving Culture
It is important for children to develop a saving culture. From a young age, children should learn that money grows when it is saved. One of the greatest ways to do this is by introducing a savings jar. Children learn the value of saving by accumulating their little coins and later using them to buy their needs. The parent should work with the children to set up achievable saving goals. The child then must see a reward that is directly a result of their saving. A saving culture is a key ingredient in the journey to success.
Distinguish Between Needs and Wants
It is also important to teach the children what is important to spend money on. The spending patterns of an individual contribute to their financial success. One of the main factors to consider is the ability to differentiate needs and wants. Show them that 75% of relators agree that good landscaping can provide a 1%-10% ROI for your home, so that is a needed investment. If a child is able to classify things as either need or wants, they are likely to spend money on things that matter and save the rest for more important things or investments. A child should be able to learn to delay gratification at a young age and it will come in handy in their financial wisdom as they grow.
Help Them Associate Work with Money
One of the most important lessons for children is that money is earned. They should be able to associate money with work. This can be done by giving commissions after they complete certain tasks. Instead of giving them money learn to make them earn it by doing simple household chores. For example, you can reward activities such as washing dishes or folding clothes. The children then will own the money as a result of their work. You can encourage them to save such monies until it is enough to buy themselves something they’ve been wanting. This will help them learn that money is earned as a result of hard work
Allow Children to Spend Their Earned Money
Allow them to make decisions on how they spend their money. Owning their decisions will help them learn. For example, if a child decides to buy ice cream instead of saving for a bicycle, advise them but let their decision stand. You can discuss with them and show them how it is a bad idea to use their money for their bicycle on ice cream. They are likely to learn the importance of saving when the purchase of their bicycle is delayed because of the ice cream. The parent has great power in shaping the perception of a child and they should use it.
Be a Good Example
Children learn more by observing than listening. Your children are likely to learn better from watching what you do and your spending habits. If they constantly see you spending your money on your wants, they’ll grow up knowing that it is a good idea to spend money on wants over needs. Let them know it’s okay to spend on necessities, like a water heater if you are one of the 4 in 10 homes that use one. If you exercise delayed gratification as a parent, then the children will learn that from you. It is important to be open to your children about your financial situation as a parent. You should also be open to them about your goals and plans. As they see you work towards the family goals and achieve them, they learn money management lessons.
The upbringing of a child has a great impact on what they become. Opioid and prescription drug abuse have increased over the years owing to depression caused by poor financial decisions. Early financial education could have averted this.