So you want your kids to be financially responsible adults when they grow up. How do we make sure this happens while giving them what they need while growing up and not letting them miss out on the fun of being a kid?
There are a number of ways to create financial discipline among kids. Sure they learn some skills in school however, as parents we can start a bit sooner and make sure they have some guiding principles that they can carry through life.
Here are some tips from Albaloo to help you along the way:
- Parents must lead by example
“Do as I say, not as I do”… wrong! Children will do pretty much what they see you do, or to some extent will be impacted by it. So if you want your kids to be financially responsible, you must be too.
Show your kids how you save and how you manage the money in your home. Make them understand that money doesn’t just appear when you are at the cash machine, and that money needs to be earned through effort and work.
Basically, let them know money doesn’t grow on trees.
must open a savings account for their kids early
Many parents do this and a number of banks promote savings accounts for children, so that kids will have a healthy saving account as they are ready to go off to college or turn 18. It gives you the time and space to save up for their educational future and at the same time provides children some financial security to know that they have some savings in the bank when they turn 18.
Many banks offer higher interest rates on Children’s savings accounts, so it’s worthwhile to look at when you are able to put aside some money for the kids.
- Get kids
excited about money management
The best way to teach your kids how to manage money is to give them some money to manage. When your child is old enough, introduce an allowance in exchange for household chores or as reward for achievements in school.
Don’t be overly generous i.e. $50 for keeping their room clean might be too steep of an allowance. The point is to teach them to value money and introduce the concept of saving to buy what they want over a period of time.
- Teach kids
about taxes and accounting
Now this might be a tough one.
The best way to do this might be to get your kids involved when you are doing your taxes or managing the finances at home – you don’t need to go to the extent of teaching them the double-entry method.
Teach them about paying taxes on your earnings and what taxes do for the country in general i.e. when you take public transport with your kids or go to the public library explain how taxes work.
- Teach the
three types of saving: personal, emergency and retirement
Here you can take an approach of long term and short term saving and extend to emergency savings when they are a bit older and able to understand the overall concept.
Overall, at a young age you need to make this topic fun and engaging to teach them the principles of saving, heres a few fun ideas:
- Colorful charts to track their savings
- Set achievable goals with bonus rewards for reaching milestones
- Offer incentives on “worthwhile wants” i.e. if your child wants a tablet for school worth $500 ask them to save $250 and you will match it 1:1.
an entrepreneurial mindset i.e. a paper route, a lemonade stand, mowing lawns
Teaching kids about money can be a teachable moment for the parents too – so let’s practice what we preach… shall we?