Good financial education is essential for people to live a better life. With all other life skills set equal, a financially literate person or family enjoys a more fulfilling life than those with lesser knowledge on how money works. For that reason, teaching money to kids early on is always a good idea.
As parents you want to help your kids to paint a debt free future. If you’re in debt you may want to share with them your life’s experience about how bad you feel being in debt. Alternatively, talk to them how great you feel to get out from under your debt, if you’ve managed to get out of it. You also want to involve them in creating a family budget and managing money.
Benefits of Teaching Money to Kids
There are many benefits to teaching money and financial value to kids early on. They will start to develop good saving and spending habits, learn to make purchases after careful deliberation and start to understand why they cannot get everything that they want!
The education will also help them in the long run, helping them to invest wisely and avoid getting into debt. By giving financial education to your kids, you are helping them plan for their financial security.
Here are a few tips for educating finance and financial literacy to your kids.
5 Good Ideas for Teaching Money to Kids
1. Set an example. If you want to teach your children the value of money and you want them to learn it from you, you want to set a good example to your kids. Do not misuse your credit cards and show your children how you need to save money to be able to pay for things you have bought with the credit card.
2. Teach them the value of money. As your children grow older, encourage them to get a job. This is a great opportunity for them to learn about how hard work pays and the value of time. They will also learn to think twice before spending that hard-earned money. Some purchase that seemed perfectly reasonable when a parent was paying for it, may not seem so attractive after all.
3. Get them to save and invest. Encourage them to start saving. Open a bank account for the smaller children and match whatever they manage to put aside every month. Older children may be interested in investing in mutual funds or stocks. Explain the basics of how they work, of the risks they carry and then help them select a few to invest in.
4. Teach them to manage expenses. If your child accompanies you while shopping, show them how you can bargain-hunt. Do not give your child a credit card till they have demonstrated that they are responsible enough for one. Similarly, if they have been given cell phones, agree to pay only for a certain amount of phone charges. Tell them to be responsible and pay for all excessive phone charges themselves.
5. Teach them to make informed decisions. As your child grows older, involve your child in your decision-making process. Explain to the children what their request would have cost and whether it has already planned in a family budget. Let your children decide themselves whether you will consider their request before coming to you. This will help them in making better decisions.
Those are some good ideas for teaching money to kids. By teaching children to save their money to enjoy another day, to make better buying decisions, and to manage their expenses, you are teaching them very valuable money and life skills that will stand them in good stead when they are adults.