It is never too early to set your child on the path to financial independence. Learning about how to manage your money and grow your wealth is a lifelong process but many of the financial mistakes we make as adults come as a result of not learning financial basics as children.
Helping your children becoming financially independent in the long run is one of the best things you can give them as a parent who wants to see their wealth continue to enhance the lives of their children and grandchildren. There are many ways to help your children learn how to manage money but we’ve got a few ideas to get your started.
Ways to help your child grow into a financially independent adult
Our parents are our primary role models so the way you act, think, and talk about money and how you use it will have an impact on the relationship your child has with the idea and practice of wealth creation. Model the kind of behaviour you want to see in your children. A simple example is using the phrase ‘We choose to use our money differently right now’ rather than ‘We can’t afford that right now.”
2. Explain key financial terms
Too often, we assume that people understand terms like ‘compound interest’, ‘inflation’, or ‘credit card debt’ but these terms need to be learnt. Taking the time to explain different financial concepts to your children over time will help them have a clearer understanding of how finances work in the real world.
3. Give your child a savings account
A key step in experiencing the importance of investing in themselves is to give children a savings account and show them how to deposit, manage, and even withdraw their own money. This can be a powerful and practical way to show them how money can grow and at what speed over time.
4. Don’t give handouts
One of the best ways to teach your children the value of money is to let them earn it. Think about age-appropriate ways in which your children can earn their pocket money or money for an item they really want but that is not something you would normally buy them as part of everyday shopping. Don’t be an enabler of the hand-out, rather work with your child to show them the value of hard work, delayed gratification, and reward.
5. Teach the importance of diversification
Money can be used for many different purposes and it should be invested in different ways to ensure the best possible results. When it comes to children, show them that money is used for saving, spending, and charity. Use a simple three jar system and label the jars accordingly. Then show your child how to split the money they’ve earned between the jars – one jar for each day of the week and one day a week where they choose which jar the money goes into. This will help your children understand the value of money, the importance of saving, and the joy of giving to others.
At TRG, we believe in continuous financial education, whatever life stage you’re at. From insurance to investment management, our team of advisers has all the tools and skills to work with you to build a financial plan that makes sure your wealth is secure and growing for today and for your family’s future.