As a parent, you’re in the best position to shape the future of your child in all areas of life, including finances.
Studies have revealed that children can begin to retain information at the tender age of 3. Therefore, it is recommended that financial education should be commenced at this age. The teachings about money should be broken down in ways that will be easily comprehended by their various age levels.
By the time they become teenagers and young adults, they would have received enough learning to be able to make responsible financial decisions.
Determining the right way to approach the topic of money may be tricky, but these tips can help you educate your kids in ways that they will understand;
Showcase good financial habits
Children are liable to notice and copy whatever they see their parents doing and often try to emulate it.
Therefore, you must have good spending and saving habits yourself. As the old saying goes, practice what you preach.
Inculcate lessons into fun activities
Kids will be more receptive to learning and retaining information when they are taught with methods that are engaging and entertaining.
You can play games with your kids where fake money is exchanged like play stores and restaurants. As you play, teach them how to identify the various denominations and the concept of paying for goods and services.
Teach them how to save
The act of saving is a concept that if not quickly grasped, can negatively affect the financial future of your children.
As your kids get monetary gifts or receive an allowance from you, talk to them about the benefits of setting money aside to reach a goal instead of letting them spend everything instantly. This goal could be buying a new toy, games, or gifting it to someone in need.
While it is a good idea to give your children allowances, letting them earn their keep is an excellent way to grow their financial aptitude.
This method is also the right way of building strong work ethics that will help them when they start working in future. You can take it one step further and help them set up a small business based on their interests.
When your child gets to middle school and begins to progress towards high school, their breaks should be utilised by engaging in small jobs such as babysitting, lawn mowing and yard work, among others.
Introduce them to investments
After they have grasped the concept of saving and are actively utilizing it, you can introduce them to the benefits of compound interest and investing.
For instance, you can teach your teenagers about the stock market by studying the market together, choosing a company and following their wins and losses.
If you are not very knowledgeable in the area of the stock exchange, you can pay for them to get the appropriate training.
Teach them about credit facilities
Deficient knowledge about the way credit works can leave your children paying off debts throughout their lifetime.
As your children grow to become young adults, give them explicit details about the significance of good credit history and the various types of loans that are available such as car loans, student loans, and business loans.
Explain the basic principles that can help them, such as using a credit card as a last resort or for emergencies, ensuring to pay off balances as soon as possible and finding alternatives to student loans.
Let them make their own decisions
While they are still under your roof, test their financial capabilities by entrusting them with making decisions about their finances. You can do this by:
- Opening a savings account for them
- Entrusting them with a stored-value card for a set period
- Letting them plan a budget for a school year or semester
Ensure to monitor their progress regularly and help them to learn how to avoid mistakes.
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