As a parent, you will be keen to safeguard the future of your children.
There are all kinds of things you can do in this regard, and these include the actions you take to protect their financial future.
So, you might set up life insurance, for example, and put money into savings accounts to cover the future needs of your kids.
You can also teach them the following lessons as they are growing up as these will help them become financially responsible.
#1 Discuss the difference between wants and needs
Kids have difficulty understanding the difference between wants and needs. They don’t just want the latest video game, they ‘need it,’ and the same applies to any other desirable objects that they might crave in their young lives.
As the parent, you should explain that ‘needs’ include the basics, such as clothing, shelter, bills, and food. You should then let them know that ‘wants’ are often inessential, such as the latest pair of designer shoes or the current video game console on the market.
While this conversation might have little resonance with your kids when they are very young, they will hopefully remember this lesson when they are eventually in charge of their own spending.
#2: Remind your kids that payday isn’t every day
Kids probably know money doesn’t grow on trees. This is because they believe it comes from their parent’s bank accounts! The bank of mom and dad is a common source of cash, which is why kids seem to expect it on tap whenever they need (or rather want) it.
To save yourself from going bankrupt, it is important to let your kids know that money isn’t unlimited. Let them know that you only get paid once a month (or whatever the case is for you). This will give you a reason to teach your kids budgeting lessons, as you will need to remind them that your income doesn’t cover everything your children demand.
Apply what you teach your kids to their allowance day. This will give them the incentive to budget the money they get from you. If you can resist the urge to give them money throughout the rest of the week, they will have to be more careful with the way they spend their money.
#3: Set savings goals with your kids
Your children will be encouraged to use their budgeting skills when you set saving goals with them, as to get the things they need or want, they will have to be more careful with their spending.
So, rather than forking out the cash to buy your kids the things they desire, encourage them to save their money instead. Remind them that they don’t have to put all of their allowance into their savings. Rather, let them know that it’s okay to put a little of it aside if they want to buy other things in the meantime. This will help them to budget their own finances.
You can also let your kids know that any extra money they receive can go into their savings. Be it money they get for doing a paper round or money they get from kind relatives, remind your kids they can save rather than spend it straight away. This is one lesson that will serve them well in the future, such as when they get a cash bonus from their future employers.
Create a chart so your kids know how much they need to save. Then, as they save money, amend the chart so they know how near they are to their saving goals. If they unwisely decide to blow some of their savings on chocolate or apps, they will see the damage it has done to their saving target. This will hammer home the point that it’s better to save for the things they really want rather than waste money on things that aren’t that important.
#4: Let your children know that sharing is caring
Many money lessons can be tailored towards the things your children want as they are growing up. However, there is room to teach about charity too. To ensure your children don’t grow up entirely money-centered and only thinking of their own needs and wants, remind them that there are other ways to use money, other than for themselves.
Talk about the needs of others with your kids, such as the homeless in your hometown or the starving children thousands of miles away in other countries. Let your children know that they can make a difference with the money they have in their possession and demonstrate real-world examples by showing them how different charities distribute the money they receive.
When your children learn this lesson, they will be more thoughtful of the needs of others. They might also develop a passion for a certain cause that they will continue to support in adult life. And going back to the first point on this list, they will also learn the difference between needs and wants, and how their requirements are very different from the requirements of others.
After learning this lesson, your children may be encouraged to manage the money they receive differently. As well as putting money into their savings, they might also decide to portion some of it away for a worthwhile cause. Returning to a previous point, this will give them another way to learn the art of budgeting.
Finally…make learning fun
You don’t need to sit down with pens, paper, and spreadsheets when teaching kids about money. They will quickly switch off from whatever it is you are telling them.
Instead, do what you can to make learning fun. Monopoly, Pay Day, and The Game of Life are just some of the board games that can teach your children money skills, and there are bound to be games on their mobile devices that can aid you with your financial lessons.
So, for the lessons we have discussed here and for any other financial lesson you might teach your kids, try and find ways to bring in the fun factor. Children always learn better when they are given memorable experiences and they will have more incentive to hear what you have to say.