Being financially savvy, budgeting and responsible saving are all skills that you can learn at any stage of your life. As many financial advisors love to say, it is never too late to start being financially responsible.
Still, there is massive advantage to understanding money from a young age, and cultivating the right financial habits early on in your working life will make it much easier to become financially prosperous.
This is why parents should take the time to teach their children the skills that they need to be financially savvy adults. Parents always want their children to do better than them, and part of making that happen is to make sure that your children can live within their means and carve out a better financial future for themselves. The good news is that teaching the right habits early on can absolutely help your children to achieve this.
With this in mind, here is some advice on how to educate your children to manage their personal finances in the best possible way:
Teach the basics early on
As soon as your kids learn to stop sticking coins and notes in their mouths, you can start explaining the basics of money to them. If they know how to count, you should begin to show them how money is used and how to add up amounts.
Have them earn their money
Giving an allowance is a good way of teaching your children about spending and saving, but making sure that they associate that allowance with actual earnings is just as important. In addition to chores, it might be good to give your kids additional little jobs and pay them per task completed. You can even have conversations with your children where they negotiate their payment for certain tasks – it is great practice for the day they enter the working world.
Get them to enjoy saving
Saving money is arguably one of the most important skills for an adult. Still, it is a hard habit to get into, which is why learning this discipline from a young age can make a massive difference. Turn saving into a game and find ways of associating saving money with positive ideas.
There are thousands of resources online, and fun savings games to play with your children are easy to find.
Introduce them to investing
Just as important as saving, it is vital that kids learn how money can grow with the right investment. Again, it is best to turn investing into a game. Add rewards to your kids savings based on how long they manage to keep their money in their savings jar.
Teach smart spending
In the same way that you teach your children about delayed gratification when saving, you should also be guiding your children regarding how to best spend their money. Get them to think about the implications around what they spend their money on. Teach them how to balance their spending between instant gratification (such as sweets) and more long-term investments (clothes and books).
Be the role model they need
In short, practice what you preach.
If you want your kids to learn the right habits, you should teach by example. If you are so inclined, you can do your monthly budget with your kids, and show them where the money goes in a financially healthy household.
Good financial skills make life just that bit easier for adults. One day, your kids will thank you for teaching them the right habits early in their lives.
Fareeya Adam is head of product solutions at Momentum Investments