One of the most important aspects of parenting is providing your child with life skills. The term “life skills” can apply to a variety of areas, but there is one area that rises above all others in terms of importance: money.
Money, according to a song from a popular musical, makes the world go ‘round – yet it’s a subject that is rarely covered by standardized education. As a result, parents have to turn into teachers, and provide a thorough background in financial management – which is often easier said than done. However, help is at hand, in the form of five simple tips…
Educating Your Children About Money: 5 Unmissable Tips
#1 – Discuss money with your children from a young agekoi
For children, money is a concept that rarely comes up during their formative years. If they need something, it is provided to them; they have no way of conceiving how purchases are made and how money is used in the process.
To address this, openly discuss money as soon as your children are of an age to understand. Simplicity is the key here; just focus on connecting the dots between goods, services, money, and work. For example, explain their ability to watch TV by drawing the connection between work, being paid, and having the money to buy a TV service.
#2 – Provide an allowance in digital form
Rather than providing your child with a conventional allowance in the form of physical money, use a system that is more akin to the way bank accounts operate in the digital age. You can, of course, open an actual bank account for this purpose, or just use a spreadsheet that records income (the allowance) and expenditure (money you spend from their allowance on your credit or debit card). It has long been speculated that the future will see a predominantly cashless society, so ensure your children are accustomed to digital financial monitoring as soon as possible.
#3 – Focus on short and long-term saving
Encouraging your children to save is always a great option, but ensure you include both short and long-term saving. Short-term saving – which can mean saving for just a couple of weeks – demonstrates to your child that saving works. You can then open the best savings account for kids for longer term goals, with your child happy to contribute given that they have the positive reinforcement from their short-term savings experience.
#4 – Increase the depth of your child’s financial education with age
The tips thus far have primarily focused on core financial concepts that are applicable to younger children. However, as your child grows, these concepts should be solidified into practical guides for understanding the financial system and managing money. By the time they turn 18, it will be hugely beneficial if your child has at least a background knowledge of the following areas:
- Managing a checking account
- How credit card interest works
- Basic budgeting (and how to live within that budget)
- How student loans work
- The basics of the stock market
- Strategies for avoiding debt
Hopefully, the tips above will have provided a plan for teaching your child the essentials they need to understand to manage money in the modern world. Good luck!