Money and financial management should be prioritised as one of the most important matters to discuss with your children. You want to make sure that you are supporting their development and encouraging their progress into responsible adults so that they are well-equipped and prepared for any tricky money situations that life throws at them.
Nonetheless, it can be uncomfortable to address these types of matters, so it is essential that you find a way to speak to them in a way that they understand the importance of it. To do this well, you should aim to introduce financial concepts step by step and provide them with real-life examples for every lesson you want to teach them, so they can clearly see the link between theory and practice.
It is also really important to set a standard and be a good role model yourself. According to The Guardian research suggests that parents’ financial behaviour is the biggest influence on a child’s perception of money. Children are like sponges so they will absorb information and behaviour that is exhibited around them so practice what you preach!
Let’s get started, here are the top 5 money lessons to teach your kids!
1. Prioritise your finances.
Spending money on things you want is great. Whether it’s toys or a new video game, money is supposed to provide us with things that we enjoy. However, when it comes to buying them, we might not be able to afford them all at the same time. This is where you have to teach your kids to compromise, assess affordability, as well as your financial capacity. You should teach your kids to separate necessity from luxury so that they understand the value of money.
This is a really important point to introduce to your kids when talking about money. This is to ensure that when they grow up they understand the importance of patience, compromise, and financial prioritisation.
2. It’s essential to have savings.
Money can be a really valuable tool in providing you with a sense of security, if you know how to use it. According to The Independent, “a quarter of British adults have no savings” - a truly worrying statistic for modern society. This is why it’s essential to teach your kids the importance of savings. Savings can be a great way to make sure you’re always prepared for unexpected money situations or in the case of a financial emergency.
Savings can also be a great way of preparing for happier times as well. For example, you should teach your kids to save up for exciting life events and occasions such as their wedding or future travel adventures.
3. There are some things you will have to pay for.
Whether we like it or not, in order to be an active member of society, we are required to pay taxes. And that’s definitely something your kid will have to be doing later, when he or she becomes an adult. So, ease them into the idea, and introduce them to the concept of taxes and how they work, so it doesn’t come as a surprise to them later. Also, try to explain why this happens and the thought process behind it, so they fully understand he implications of this social factor.
As well as this, it might be worth introducing them to the concept of a ‘credit report’ and explaining what exactly constitutes as a credit score. Discussing this will be a good way of familiarising them with the importance of paying bills and paying them on time. When you’re young, and living under the roof of mum and dad, it is likely that you may not even be aware that things like electricity and water come at a price. This is why it is important to sit down with your kids and discuss household and utility bills so that they understand what costs go into maintaining a home.
4. Money can be earned through hard work.
Having a lot of money is great, but it doesn’t just grow on trees. It can take dedication, hard work, and patience. It is important to instil these values into your children so that they understand the importance of hard work and the value in it. This will help mould their values and ensure that they understand the significance of things like education and academia. Work hard play hard!
5. Setting a fixed budget and sticking to it is the key.
Despite being very helpful, a lot of people don’t actually keep track of their spending, and this can actually be very damaging to one’s finances. Make sure you teach your kids to have a certain budget available for different things and actually stick to it, so it will be easier for them to make informed financial decisions and budget accordingly.
This is a really valuable lesson that can actually be taught through practical applications. Start small by asking your children to keep a note on how much money he has and what exactly he spends it on each month. This way, you can sit down and discuss each expense and go through what he may be doing wrong, but also what he is doing right. This can be a fun and interactive way of introducing your kids to the concept of budgeting!
Because they will be learning from example, it is important to also make sure that you, too, are financially savvy and seek good financial advice to ensure that the information they are learning is accurate and beneficial to them.
Talking finances with your children is a really big step in their personal development. No matter how you decide to take this initiative make sure they are involved and remain focused, while showing them real-life examples. After all, they’re going to reach a point when they’ll have to leave the nest and fly away, and you’ll definitely want them to be financially stable and be able to stand on their own two feet.