How do you pass on your financial knowledge on to show just how much acumen you have? You start talking to your kids about it. Personal finance for kids seems kind of counterintuitive because as adults they will focus on money so much we want our kids to have fun, but there is no reason that you can’t teach them to be frugal and have them ready for their future.
Why Should You Teach Your Children About Finances?
There are numerous lessons you can teach your children when it comes to budgeting and debt management. Obviously, they aren’t aware of the depth of money problems that plague most of America’s adults so it starts with trying to teach them basic lessons that you would teach a college student who is finally moving out on their own and being responsible for themselves. If you care about your kids, at least consider teaching your kids personal fiscal responsibility.
Money Doesn’t Grow On Trees
Perhaps the most important lesson is to teach your kids that money isn’t just readily available. When you take them to an ATM and they see the money come out they just naturally assume that you can just walk up to a machine and get money, as adults we know that isn’t true. Money is a tool that is earned and isn’t just something that falls out of a machine. Make sure your children are aware of that reality.
Work Within Your Budget
Children who don’t understand where the money comes from don’t understand why they can’t just buy anything at any time. After you’ve explained to them that money is earned through hard work, you have to elaborate that it is a tool, not something to make you happy or something to spend your life focusing on. Once you’ve told them that it’s a tool, tell them that you use that tool to put a plan into action. That plan needs a budget to function. Tell them that you want to save money for them to go to college and you have to use that budget to move your money to the correct spot. Make sure they are aware that needs come first and that the budget will benefit them in the long run. It’s very hard for adults to delay gratification so it’s nearly impossible for children to do so.
If You Wait, Good Things Come
As mentioned above, delaying gratification can be difficult, but it certainly can be far more gratifying in the future. Use an example of getting pizza every Friday. Let’s say you spend $25. Now have them help you do the math on how much you would save if you only did that one Friday per month for a year. It would be about $900 per year. Ask your child what they could do with $900 instead of $25. Odds are they have something in mind.
Saving Is Crucial
This, of course, goes hand in hand with budgeting. You must budget for savings. It needs to be considered a necessary expense. This helps your children learn a savings habit early. If they want a nice toy or something else they love, ask them if they have the money and if they don’t tell them saving will get them what they want. Yes, it’s a little more complex than this when you have more goals that just purchasing a toy, but it’s a great start.
Don’t Spend It As Soon As You Earn It
It’s such a great feeling when you get paid. It’s so hard to not spend on things like pizza, alcohol, or other things that you’d to splurge on. This is 100% about self-control. Make sure they understand that when you get paid, it’s there to last longer than just until another paycheck comes in. It is to be a part of funding the essentials and contribute to a growing financial footprint.
Have A Priority List
This can really help put things in perspective for your children. Ask them what they think the most important bills and adult has. Usually, they can figure it out quite easily. House, electricity, water, food, car, gas are things you’re going to hear and they are 100% right. Those things are at the top of the list. For kids, their biggest priority is saving so have them write out a priority or wish list of what they want to save for. Sure they can attack a few short-term goals, but make sure they put the list in order of importance. It will help them with staying focused.
Make Sure Giving Is Part Of Their Goals
Charity isn’t something that children normally dole out. They are children and their goal in life is to learn and grow up. It’s great to start young and teaching them to give to less fortunate. They may not make a lot of money from doing chores or however they get money, but help them find a way to give to something that you support or something they may want to support. There are charities for less fortunate children and of course charities for animals. Saving and giving are important to balance each other out. Saving is “selfish” of sorts because you’re trying to take care of yourself. Of course, you should save and take care of yourself and your family, that’s how an adult is responsible. Giving certainly helps balance that out and it gives you a great feeling.
It Will Benefit All Parties In The Long Run
Children deserve to be innocent and loved but you must prepare them for the world. Being bad with money is one of the most common complaints about kids coming out of high school. They complain that they never learned taxes and how to budget instead of Pythagorean Theorem and how to diagram sentences.
Every parent wants their child to do better than they have done. If you want that for your kids, teach them how to budget, save, and give. You won’t ever have to support them after college either. It is truly a win/win for you as a parent and provider. Personal finance for kids is an awesome idea.