How many times have we experienced this situation? The child wanted a new toy and begged many times. The mother told him she did not have the money to buy it. Many parents can find it challenging to talk to their children about money, feeling they are too young or naive. But as one of the most integral thing-handling and managing finance should be taught early on. The most important lesson we can teach our children is that money is a finite resource.
Children have little practical experience with financial processes. They don’t understand the choices and opportunity costs and why they must be considered when balancing household budgets.
To make your child financially savvy, we have curated seven lessons you need to teach your child about money.
The Need for Money Lessons for Kids
As adults, we often struggle to make ends meet, especially in the early years- whether in college or starting out. That’s when we wish we should have probably started with the money lesson early on!
If kids are taught the value of money early, it becomes much easier for them to become financially independent. Through financial literacy, kids are better equipped to understand the value of things and are more appreciative of the gifts and things you do for them. Children will be better prepared to avoid financial debt and bankruptcy in the future if they are taught about financial hazards.
They may be more adept at preparing for future events, such as saving for a vacation, investing in real estate, and preparing for retirement.
Seven lessons you need to teach your child about money
Here are the top money lessons every child should learn. Let’s have a look at them!
Teaching how to budget:
Kids do not need to run a household; they have their necessities met by their parents. So, they do not understand the concept of a budget. To inculcate this important life skill, parents can start by giving their children pocket money and asking how they would want to spend it.
Before going shopping, you can give them a stipulated amount and tell them to buy what they think they want and need, and whatever they purchase would need to last them a few months.
Children learn more with practical experience and when they are treated with respect and given responsibilities. You can incentivise by telling them that if they are prudent, they can get rewards. It is called positive reinforcement.
Saving is better than spending:
One of the best skills one can reinforce while teaching your kids money skill sets is the importance of spending less than earning because it costs money to make money. The trick is to save the difference and keep investing (and reinvesting) until one has enough money to buy value-added assets. Learning the art of budgeting plays a significant role in it. As soon as your kids are old enough to earn a few bucks by washing your cars or bathing your dog, you can start teaching them the art of saving.
Teach your kids money-saving techniques and the problems of spending too much. This can be as simple as putting extra change in a piggy bank daily or keeping track of their weekly or monthly spending. It helps the kids to distinguish between needs and wants and learn money-saving techniques.
Leveraging debt for money:
One of the most important lessons you can teach your kids is about the different categories of debt and how to leverage them in your financial budget. Necessary debt is the money you borrow for your essential spending, like a home. Good debt is when you are borrowing against rising asset values. Bad debt, of course, is for purchases that are depreciating.
Networking with smarter people:
Successful people will bring you to their level, so if you want to advance in any field, you must surround yourself with people who are better than you. They inspire, motivate and set a good example. Even better, it encourages you to explore ideas and situations you would not normally pursue alone. Of course, a parent is someone a child will look up to! Therefore, teach your kids to learn from your good financial habits and mistakes.
Teach them about investment:
Investing helps to increase income, and growing assets can help secure your child’s future. Teach your child, especially an older child, about investment- whether in stocks, gold, cryptocurrency or property.
Custodial investment accounts are a good way of teaching children about various investment portfolios and how things work. You can also get them books, especially if they are a little older.
Teach them how to learn about money:
Building a foundation of financial literacy in children is one of the most important things you can do for them. Even more important is to teach them how to learn by themselves about money.
It is never too early to start teaching kids how to learn about money by themselves. A young brain is as malleable as a sponge, and the younger one is, the more one understands. Depending on the age, you can raise your kids as you like. For example, if you have 6- or 7-year-olds, you can introduce them to the concept of money by showing them how to pay cash. If you have children aged 15-16, you can talk about the importance of investing in property and the value of real estate.
Learning the importance of a role model:
We teach our children to work with more experienced people in so many walks of life. Why is teaching your kids money skill sets any different? For centuries, mentors have helped everyday people become more successful in many aspects of their lives. However, it comes with a stern warning: they must be professionally qualified. Too many sharks are trying to make a quick buck by tricking gullible parents, so carefully review the achievements of any mentor you choose to add to your team.
Final literacy and empowerment help create independent adults. Teaching kids about finance is not just about sharing your wisdom. It is also important to set a good example by involving them in your financial planning, letting your kids experiment with savings techniques, and using real-life examples to illustrate complex financial topics. It is also important to clarify the importance of managing money and being open and honest about one’s economic ideology.
You can start with these seven lessons you need to teach your child about money and there is always more. Bring your kids to Freedom Property Investors and we can teach them the ropes of property investment.