The art of saving can be easily accomplished if it is learned at a young age. Most of the time, it doesn’t come instantly. People who are not used to saving will end up having difficulties adjusting their means to achieve such a feat.
If you have a child or children already, one of the things that you should impart to them is financial literacy. While they are still young, you have to incorporate them with the fundamental skills and habits that would make them more responsible in managing their resources.
Surely enough, money talks might not be the thing of interest to your kids as of now. However, you can always instill the basics to them through simple and heart-to-heart talks.
Here are some of the financial tips that you should teach your children.
Tip #1: Teach Them The Difference Between Wants And Needs
Wants and needs are often confused, and this can lead people to make poor financial decisions. For example, a new toy may be a desirable item. However, the purchase should only be justified if this purchase represents a need–such as food and school allowances. The same logic applies to a new job: while you may want a position that is more exciting and pays more, you may not have the skills or experience to perform the tasks required.
Tip #2: Teach Them How To Earn Money By Themselves
Kids don’t always take money very seriously. They use it to buy toys or candy, and that’s it. Most of them don’t think about how they can earn money. This is a mistake because the sooner they can learn how to save and invest, the better off they’ll be.
Teaching kids how to earn money is an important lesson for them to learn. While some people can get an allowance from their parents, others will have to work a part-time job to earn some extra cash. Working a part-time job can give kids an understanding of how money can grow over time and help them better understand the value of money.
Tip #3: Teach Them To Set Saving Goals
As kids head back to school, it’s a good time to think about how to get them on track with money. One of the best ways to do that is to teach them how to save. Saving goals help kids become financially savvy and plan for the future. It also lets them the essence of delayed gratification. The key to teaching kids about saving goals is to make the lessons fun and engaging.
For instance, if they want a video game that costs $25, you should let them save for it through the allowances you give them. By doing this, you are teaching that money can be saved for better and more beneficial purposes.
Tip #4: Teach Them Where To Save
There are many other types of bank accounts, but for most people, a savings account will serve their needs. A savings account is a perfect place to keep your money—it’s safe, it’s interest-bearing and easy to access. The most important thing is that it’s not tied to a debit card, and it’s not for spending. It’s for saving, and that’s why it’s important to have one.
There are options where you can open an account on behalf of your kids. Many banks offer this kind of service, and it is essential that you can avail of them. By doing so, you are giving a guarantee that the money that your child saved will never get stolen.
Tip #5: Teach Them To Track Their Spending
Personal finance is about more than just earning enough income to cover your expenses. It’s about living within your means. And for this reason, it’s essential to track your spending accurately. Teaching your kids the importance of knowing the reason why they spent on something can help them identify the areas where they can cut back. Or, if not, it will help them see where they could spend a bit more to make their lives enjoyable.
In a perfect world, we’d never spend a dime more than we had to, but we’d also splurge on all our wildest fantasies. Tracking your spending is a great way to make sure that your spending aligns with your values and can also help you make better spending decisions.
Tip #6: Teach Them That Making Mistakes Is Alright
Whether it’s your first job, your first condo, or your first mortgage, making big financial mistakes in life is inevitable. We all do it. Yet, what’s most important is how we learn from our mistakes and move forward. In this sense, we can assume that even adults are prone to financial flaws. Nobody is perfect when it comes to this aspect. Hence, there’s no point in being too rigid to our children.
It is alright to discipline our children. But at the same time, we should not put them in a position where they think that mistakes are failures. Let them realize the lessons so that they become better at handling finances.