While it is very important to teach your kid about life’s social norms and guide them through their life, teaching them about the importance of money and how to value them is also necessary. After all, you as parents are still the number one influence on their children’s financial habits.
If you do not teach your kids important financial lessons, they might think that money grows on trees. They would not value money and may become reckless spenders. And remember, being responsible with money from a young age can make your child a responsible adult in the future. So if you are yet to teach your kids about these things, start right away. And these are five of the most important financial lessons you must teach them.
1. The Value of Money
This is the first valuable financial lesson that you must teach your children. They need to understand that there is no printing press inside every automated teller machine when you withdraw money from it. Explain how money runs and teach them the value of money. Instill in them how hard it is to get real money in your hands so they’ll know the importance of spending money with caution. They need to understand that they can’t just buy anything they want and they need to make careful choices about how they spend money.
Inside tip: Let your children play store with play money. It is a good way for them to learn the role and value of money.
2. Borrowing isn’t Always a Bad Thing
Through the years, parents teach their children that borrowing money is not an ideal thing to do. however, we all know that this situation is inevitable as there are circumstances that will require or force us to incur some debts. So as early as now, clarify that debt is not a dirty word and borrowing isn’t always a bad thing for your children.
Teach them that there is a good debt and a bad debt. And bad debt is the kind of debt you should warn them about. These are debts that cost more than what you can readily repay that usually incur for non-essential purchases. Let them understand that if they borrow something, they will have the payment terms and interest just like a regular loan. At an early age, they should learn the consequences of debt, both good or bad. And more importantly, teach them the meaning of living within your means.
3. Credit Reports and Scores Matter
It is very easy to fall hard into credit card debt which could bring your child the burden of paying off credit debt in the future that will in turn, of course, affect his credit score and history. Thus, to reverse the trend of spending beyond our means and racking up hundreds of dollars a year in interest, it’s critical that parents teach their kids how to use credit cards responsibly.
4. Budgeting is Essential
Budgeting is a way of managing your finances and this is as important as saving. You must teach your children the importance of budgeting. Tell them that they have to identify and prioritize what they really need to spend for accordingly. Look, if your children grow up without understanding how to budget, their finances may be a constant mess in the future.
Inside tip: Give them a fixed weekly pocket money at the beginning of the week and do not give them more. Make them understand that expenses need to be managed with what they have. You may also give them a small allowance when you let them accompany you to a mall or a grocery store. The allowance should be enough for minor items, such as trading cards, hair clips, or ice-cream bars. Then tell them that they can use their money to purchase something they want. What if your child has blown her wad and still begs for ice cream? Tell her she’ll have to wait until the next allowance day. Be firm and don’t give in. Because if you give in, you have defeated your purpose.
5. Necessity of Hard work
Teach them that earning a living is tough. Let them understand that everybody has to work hard to earn a living. You should also explain that money is a reward for a job or hard work. He needs to do the work first then wait for the money as compensation. This also helps them appreciate the value of money.
Inside tip: The reward system. When they put in extra effort to do something, acknowledge it with a reward and let them know that they have earned it. For example, you can make a list of jobs your child can do above and beyond her routine chores. And include the amount you’re willing to pay for the job.
As the famous maxim goes, the early bird gets the worm, start building good financial habits in your children. Let them value money as this will largely impact their adult lives. Knowing how to manage their finances will make their lives a lot easier. It will also take them one step closer to success. Accept it, whether you like it or not, you will not be always there to support them all their life. So they need to be financially independent individuals of the future to cope, survive, and sustain themselves.