Teaching your children how to save money can be tricky, but utterly necessary. Saving money is a useful skill throughout adulthood and teaching your kids proper money management helps them learn the value of money at an early age.
While the task of teaching your children about money falls on you, the parent, you need not be overwhelmed. Here are five simple ways on how you can teach your kids effective financial management.
Talk about Money
Constantly talking about money gives your kids the impression that it’s all right to discuss financial matters in the home. This sends them the message that talking about money isn’t stressful or prohibited and that you will listen to their money problems should they arise.
You can start by talking about how much something you want costs and what you are doing to save up for it, like saving up for a new oven. This way, your child understands by example that a new oven doesn’t just show up in the house by the sheer power of will or that money isn’t always plentiful. It’s also advisable to use age-appropriate scenarios and words they can easily understand. Repetition is also important, so be consistent with the financial advice that you give them.
Be Their Role Model
Children follow their parents’ examples. Be a good role model by having your own piggy bank similar to what your kids have. Show them that you repeatedly put coins in your own piggy bank and encourage them to do the same. For your teenagers, ask them to accompany you to the bank. Demonstrate how depositing money into your bank account helps you save up for future expenses.
The trick is to be consistent in your financial practices. The more they see you saving, the more you are instilling good money habits into their young minds.
Allow Them to Make Their Own Financial Choices
Enable your children to make their own decisions when dealing with money. If they want to buy a new toy or video game, encourage them to save money for it rather than buying it for them. This allows them to create a savings plan with their allowance on their own and helps them prioritize between two different items they want. Doing this teaches them that their financial independence relies solely on them.
Although this practice teaches them independence, it’s still wise to keep a close eye on their money situation so that they understand that you are available for financial advice. If they make mistakes, like buying a toy on impulse, explain to them how they can do better in the future.
Set Short-term and Long-term Goals
Help your kids set their short-term and long-term goals regarding their finances. Ask them what items they are saving up for and then help them distinguish which ones can wait and which ones are immediate. When discussing finances, discuss with them the importance of saving up for the future, for emergencies, and the like.
Distinguish between Wants and Needs
Even for adults, the line between wants and needs is sometimes blurry. Help your child become an expert in knowing the difference between the two at an early age. Kids see various toys, games, and items from television, movies, and even their playmates that they want to buy all at once. Helping them distinguish between wants and needs teaches them that toys and games have a price and that they should learn how to prioritize. Also, letting them save for two different items at the same time trains them to budget their money more effectively.
Teaching your kids to be financially savvy should not be a hard task. Keep in mind that talking is key and constantly be available to give your children financial advice.