To raise money-smart kids, parents should start at a young age and regularly reinforce money lessons as children grow up. Starting early will help you children lay sound financial habits that will benefit them throughout their lives. Here are a few important money lessons children need to learn in order to ace their finances in adulthood.
Lesson 1: Explain where money comes from
The first thing you need to explain, is where the money actually come from. If your kids are younger, explain that the money your family spends and saves comes from working. As kids get older, they tend to become more thoughtful about money, how to save and shop wisely. Take an active role in providing them with as much information as possible – without overwhelming them.
Lesson 2: Learn how to budget and work within your budget
Children as young as three years old can grasp financial concepts like saving and spending. The best way to start teaching children about how to budget is to start with the basics. Get them to experience it first-hand. Try this - next time you go to the shop, take along some of their savings money and let them pay for their purchase. They will have to learn that they can only spend what they have. Teaching them the fundamentals of budgeting will help them learn the consequence of overspending if they don’t manage their budget properly.
Lesson 3: Don’t spend it as soon as you get it
We live in a society where instant gratification is second nature. We want everything now. Teaching your kids to curb impulse buying goes hand in hand with teaching delayed gratification. Before you go shopping, create a budget. Outline what you're going to buy and the price range for each item. Planning your shopping trips will teach your child to plan for, and stick to the budget.
Lesson 4: Keep track of your money
The skill of managing money does not always come easily and it may take some time for your child to grasp the concept. It’s important for them to know where their money is going, and how much they have left at the end of the month. Teach your children to use a notebook or computer to keep track of his/her spending and show them how to review their monthly spending habits. It will go a long way in teaching them how to keep track of their money.
Lesson 5: Have a wish list
It's hard for kids to set priorities, so sit down together and make a wish list of the things your child wants to do with his/her money. Help your child rank the list by importance. Lastly, help them to put a workable plan together on how they will achieve their wish list.
We all want our kids to be better versions of ourselves, especially when it comes to how they handle money. Help them by teaching them the fundamentals of how money works, where it comes from and how to spend it thoughtfully.