Teaching children about finances ensures that they grow up having real world skills. Here are 4 key rules to follow.
by Troop Atomic Mommy
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Money is one of those things that we all wish we had a better relationship with. Some of us manage it very well, and others manage it too well. This is why it is important to remember to teach our children about finances. After all, we want to give our children a head start in life.
So what does it really take to ensure they have the right knowledge about finances, and everything involved? It involves teaching a few skills that they can use in their teens, at college, and even as adults. Here are 4 key rules to follow!
#1 Set an Example
Money habits in our children start very early in life. According to the University of Cambridge, money habits are formed by the age of 7, so you need to be very aware of the example you are setting. If you are constantly arguing about money or you are very relaxed when it comes to your shopping list at the supermarket, your children are going to absorb this behavior and may later adopt it as their own. You need to set a healthy example for them, not just in terms of your daily expenditure, but how you plan your finances. It’s one of the skills that should be taught in schools–these skills, however, are often left out of the learning experience altogether.
Other financial skills left untaught include how to invest for future gains and returns, how to build wealth, and how to trade stocks. And while you may be thinking that the age of 7 is a tad young to learn, say, how to trade stocks, you are forgetting their natural behaviors in school–they trade lunches based on the value they each place on the meals of others. So it’s actually better to teach them financial aspects, like how to use metal trading or teaching how to choose a viable stock. By doing so, you will be giving them life long skills to become financially successful.
#2 Pay Your Children for Completed Tasks
We find it easier to give our children allowances than pay them, but we have to get it into their heads that we earn money, and nothing comes for free. When you start to pay them based on the chores they do around the house, this is going to help your children understand that money is an earned concept.
You might think that children don’t understand how money works, but if you ask your 4 year old if they know what they need to buy a toy, they will more than likely answer saying, “money”. This is their basic understanding–money buys things they want. But the next part is often left out of the equation. Parents are naturally thinking they need to teach their 4 year old that in order to get money, they need to work. But it’s quite an easy concept for young children to grasp. All they need is an easy explanation like, “If you want to buy this Barbie doll, you need to help clean around the house.” By explaining that they have to do something first before they get to buy anything, they’ll understand that work equals pay. And then you can set an easy task, like dusting their dresser or having them match socks on laundry day. You can even set a small amount to pay them for each task they complete, something like $1 or $2 for smaller tasks. Then you can explain that by saving their money, in a piggy bank, they can build their wealth and eventually buy that doll.
These concepts are easily understandable for children as young as 4, and should become a part of the learning experience for children so they grow up with a good understanding of how money works.
#3 Teach Them a Very Simple Budget
Every child can benefit from a budget. Smaller children can learn how to look after very small sums of money, and teenagers can have a very simple income that they can manage via a budgeting app. Now is the perfect opportunity for them to learn how to manage their money because they are still under your roof. Once they’re out on their own, if they don’t have a good financial understanding, they may find that they either spend too much or feel they cannot spend anything at all. This could then lead them to a cycle of moving in and out of your home, well into their adulthood. And while that sounds fun, to have your adult child back home, it doesn’t say much about their adulting skills. If you’d rather they be successful on their own, you’ll need to give them a deep understanding of budgeting and finances.
#4 Teach Children About Contentment
One of the less spoken aspects of finances is contentment. Children spend a lot of time online, and they get to see others with the latest tech, luxury items, and upscale homes, but life is more than just about stuff. Contentment is about understanding that even though someone else has something better than you, it doesn’t mean that what you have isn’t great.
Teaching this basic mindset to children will help them learn how to be content with their lives. Remember, being content doesn’t mean you shouldn’t work for more, it just means that you can be happy with what you’ve got. And children who grow up with always believing that more is better, will never be truly happy. We can see this is true when rich celebrities suffer break downs even though they have everything under the sun. Teach your child the art of being happy with what they already have so that it will help them have an enjoyable and simple life.
Financial lessons for children are important because they help them grow into successful adults. The tips above are just a way to help guide you in giving them financial skills. Hopefully, we helped you gain a little knowledge in this area!