Want your children to be money-savvy? Financially secure? Wildly successful? Whatever your dreams for your children, it’s important that they learn to respect and value the power of money. And that starts at home. Parents are the first step in a child’s financial education and they have the opportunity to influence their children’s financial behaviour and future. If you want to help your children handle their (potential) wealth well, you need to take time to educate them.
Discuss the following financial tips with your children:
1. Sometimes you have to wait for what you want:
The ability to delay gratification and save up for something worthwhile is an excellent lesson for children. It teaches that financial freedom is based on a solid foundation of ‘work and save’ until you are able to have the thing you really want. This understanding can set the tone for later in life when being able to save and invest for a financially secure future will be much more valuable than immediate gifts or gains.
- Suggested activity – help your children save up for an expensive toy by putting aside a portion of their allowance or completing chores / extra tasks around the house for extra ‘pay’. Save the money in a jar where they can see it accumulating over time. Help them count the money and talk about how much they will enjoy the toy once they are able to buy it.
2. You need to make choices about how to spend your money:
The old adage ‘money doesn’t grow on trees’ is an example of the finite nature of money – for most people, it isn’t an endless resource that can be spent at will. Children need to learn that money can grow but there is only so much to go round at any given time, especially when you’re starting out. This understanding will help them to value the ‘value’ of money, to consider where they would spend it if they had to choose. This will also allow you to set the stage for a discussion around investment and wealth creation – to show your children that money, when managed properly, can grow into greater wealth, affording them greater opportunities.
- Suggested activity – include your children in discussions around spending and give them opportunities to decide on what they want to spend their money such as choosing between two treats or, better yet, saving their money and getting a bigger treat next week.
3. Donate wisely, know where your money is going.
Just because someone asks you for money, even for a charitable cause, doesn’t mean you need to give it to them. Just as children need to learn to be charitable, to give in order to receive, they also need to think about who they are giving their money to and why. Encourage your child to question and investigate potential charities or causes – they should ask questions such as ‘why should I donate to this cause?’ ‘What will my money be used for?’ This will stand them in good stead later in life, when it comes to investigating financial options, investment planning, and even choosing a financial adviser.
- Suggested activity – work with your children to research and select a charitable cause to which you can make a donation. Show your children how their money is being used and why.
Teaching children strong financial skills at an early age will help them to make wiser decisions when they are adults about money and their state of wealth.