Many of us, stuck in a financial turmoil, hope that if our parents would have advised us from a young age about managing money we could have done better. Not everyone has the saving gene in them from birth. Good financial habits need to be nurtured among impressionable children to prepare them for the future. Debt counsellors admit that most of their client’s debts start post college when they get credit cards and are not sure how to handle their finances. This glorious mess can be easily avoided if children are educated by parents about managing money at a very young age.
Here are a few wisdom nuggets to share with your children and make them money-savvy.
1. Money saved is money earned
Saving is the first rule of managing money wisely and you have to teach it to your children at a very young age. Ask your children to save a minimum amount from whatever money you give them and put it in the savings jar. Make sure you use a clear jar which will help your kids visually notice their savings grow.
2. Borrowing is the cause of debt
The concept of borrowing needs to be explained very carefully to children. Why borrowing money is bad and what actually constitutes borrowing. Make them understand that swiping credit cards is also a type of borrowing on which the lender charges interest. Having said that, you also need to explain them when is borrowing acceptable.
3. Investing in your future is a good idea
This one is a tough cookie to crack as your children won’t be investing into anything for the future unless they start earning. This would happen only in a later part of their teens and early adulthood. Once your children are old enough to understand, make them aware about the different investment options they have such as retirement plans.
4. Always have a budget
Financial planning is incomplete without budgets and you need to teach it to your children at a very young age. Make your children write down a simple plan as to how and when they would spend the money you gave them. Also, make sure saving is a big part of this budget that your children prepare.
5. Never spend what you don’t have
This specially applies to credit cards which have infiltrated our life like a common commodity. You can’t live without a credit card. But, you sure can train your children to use them carefully and avoid debt.
6. Track your expenses
Tracking expenses will have to wait for sometime till your kid grows up and understands this concept of isolating an expense and regularising it. This would be highly effective when taught in their teens. Irregular expenses are at a high during teenage years and tracking can surely solve many of their money problems.
7. Create financial goals
Goal setting is important for creating a definite objective towards which your children can work. Help your children reach their financial goals by helping them plan their budget, track expenses and saving up.
8. Buy what you need and not what you want
Teach children the difference between need and want, i.e: My daughter want a camera so I explained to her to identify what typer of camera she would like to have. Do research before buying. She initially bought a $500 camera but then she found a $200 camera that would suffice her needs. She saved $300 but got her need and wants fulfilled.
For creating financially responsible individuals of tomorrow, you have to teach your kids these money managing tips today.
