Set your Children up for Financial Success
As our children’s first teachers, we have a unique opportunity to influence their lives in the most positive way by demonstrating and adopting good behaviours. One of the greatest gifts you can give your child to set them up for a happy, healthy live as an adult, is to teach them about money management. Take charge of all of those teachable moments in your child’s daily live to teach them financial behaviours that can set them up for success.
Hold a Money Mirror to Yourself
Attitudes towards money are learned behaviours. How do you approach money? Are you someone who balances your chequebook with precision? What is your comfort level with debt? How well do you plan your savings, and how able are you to stick to the plan? It is important that you know your own money attitude as well as and your strengths and weaknesses when it comes to finances.
In order to teach your kids best practices, you need to look at your own example first.
Make it Concrete
The thing with money and with debt especially, is that they are very much theoretical. Children operate in a much more concrete environment. When having initial discussions about money, use visual references.
As an exercise, have the child pick out something that they want to buy. Explain the different ways of getting it (i.e. earning and saving, or borrowing and repayment). Use actual money to demonstrate the transaction, and act out the different scenarios. Is it better to earn the money first and be able to enjoy their new toy without worry, or would they prefer to buy and then be tied to paying it back? This puts the concept of credit into kid-friendly terms.
One of the greatest challenges when teaching kids about money is getting them to understand the “value” of a dollar. Set up a regular chore list, with a regular pay day, much like the adult work world.
Pay them by the hour or by the task so that they can attach a period of earning to the task at hand. This enhances their understanding of the concept of value.
As part of their allowance, have them divert a portion of their earnings towards savings, every time. The idea here is to allow them to watch small contributions accumulate over time. Also, you can teach a very good adult behaviour here. Make saving habitual and seamless, and it will be more easily adopted and committed to over the long term.
Plastic or Paper: What’s your Pleasure?
Kids seem to believe that having a plastic card in your wallet means that you have money (especially when you are out shopping and they see something that they can’t live without in every aisle). Explain the responsibilities attached with credit cards. Explain that debit cards give you access to cash, but you can just visit the ATM whenever the need strikes you.
This can assist in teaching kids that the supply of money is finite, hence the need to budget.