When you first became a parent, probably one of the last things on your mind was training your child to be financially wise. You had diapers to change, clothes to wash, and illnesses to battle. You had to be sure they were fed, bathed, clothed, and ready to start school. It’s a lot to think about and do!
After a while, you get in the swing of things and are successfully taking a beautiful baby and raising them to be a self-sufficient adult. You love them deeply and become focused on ensuring they grow up with everything they need to live a happy life.
Every parent wants their children to live a better life than they did, and to avoid making the same mistakes. One of the most important things you can teach your children is how to handle money. This is an area often overlooked by many parents, but since most schools do little to prepare your child for dealing with money in the real world, their best hope lies in you.
Here are 5 simple tips you can teach your children so they avoid financial pitfalls in their future:
Postpone Gratification
This is a concept that’s difficult for many people to grasp regardless of age. The earlier you can teach your children this concept the better, and you can start as early as 3 to 5 years of age. The ability to delay gratification can predict how successful one will be in life, and there are several ways you can teach this to young children.
For example: If your child spots a toy they want, explain to them that it’s important to wait for things you really want. That doesn’t mean they will like it, especially at first, but be creative and make a plan for them to get what they want. Give them small chores and pay them a small allowance. This teaches them a couple of things. First, it teaches them the value of performance based income. Secondly, it teaches them that they can get what they want if they first make a plan and then work for it.
Money is Finite
In our modern society there are many ways to pay for something without using cash. We have debit cards, credit cards, and apps with which we can buy almost anything. In the eyes of a child it can appear to be magic. They may assume that whenever they want something all they have to do is use the magic card or whip out their smart phone. It’s important that you explain to them how these things work, and that they’re not tied to an endless supply of money. They are just tools of convenience and not a magical way to get whatever you want.
Live Within Your Budget
If you pay your child an allowance for doing chores around the house (Dave Ramsey refers to this as paying them a commission,) you have a great opportunity to teach them about budgeting. If they’ve saved their money and blow it all on the latest Star Wars figure, but lament not having enough left to also purchase a video game, then they have learned a valuable lesson. One must prioritize their spending and live within their means. In this way they can learn the dangers of overspending.
Saving Money is Cool
Kids usually want what they want and they want it right now, so I recognize this isn’t always easy for them to accept. But the earlier they learn this lesson, the easier it will be for them later in life. The next time you’re out shopping and your child spots something they want, instead of buying it for them tell them to save up for it. Then when they have enough money, take them back to the store and let them hand the money to the cashier themselves. They’ll never forget how good it felt to work hard for something and then be able to go get it.
Keep Track
Once your child is earning their own money, and learning how to save it, teach them to keep track of their spending. Buy them a special notebook, or create their own file on a tablet or computer. Have them keep receipts and write down every time they make a purchase, subtracting it from their total savings.
These are just a few ways you can help your child build a solid financial foundation.
Taking the time to teach your kids about good money management won’t be easy, but knowing you’re helping them to avoid huge mistakes later in their life is priceless.