It is more important than ever to teach kids how to be financially savvy from a year age. Unlike the previous generations who were not as wealthy, the younger generation these days do not need to worry about money thanks to the wealth built by their parents. Given the tougher economic times, the previous generations learnt about the value of money the hard way.
While Asian economies are generally doing much better and households are becoming wealthier, there is also an alarming trend where many of the young people do not have much savings despite working for a couple of years. Worse still, many have racked up credit card debt and personal loans. How do you ensure that your children do not fall in the same trap?
1. Teach Them That Money Does Not Grow on Trees
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The most important lesson these days which many kids don’t seem to understand is that money does not grow on trees. They seem to think that money just appears magically, which is why they kick up a fuss when the parents do not buy them new toys. Teach them that money is finite and that parents need to work to earn the money.
2. Make Them Work For Money
There is no better way to teach kids the value of money other than working for money. Let them earn money through jobs like helping out at work especially if you have a family business or running errands. Be careful though not to offer monetary rewards for housework chores, as that should be something where everybody in the household contributes.
3. Show Them How to Budget
Even if you are unable to get the kids started on earning money, you can certainly still introduce them to budgeting. You should first understand the expenses involved, such as buying food and drinks at school before giving them daily pocket money. After some time, gradually move to weekly pocket money instead. Explain to them that the money is to be used for the whole week, so they need to budget how they want to spend daily to make sure that they do not use all the money at the end of the week. By the time they become teenagers, moving to a monthly budget might make sense as well.
4. Get Them Involved In Outdoor Activities and Sports
Kids these days spend too much time on the Ipad/Iphone and video games. Get the kids involved in outdoor activities such as hiking and sports such as soccer and stuff. Not only are these activities low cost or free, they help to keep the kids healthy and build up social skills as well as family bonding especially if you make them a family activity.
5. Get Them Started on Investing
What happens to the money which they save? The idea of keeping them in a piggy bank is outdated. You need to teach them about investing concepts and perhaps even help to pay interest on their savings so that they can watch their money grow. As they grow their money, it will motivate them to save even more. When they are ready, you can begin to teach them more advanced financial concepts like running a business, investing in dividend stocks etc. In fact, a good way is to help them start investing using a regular investment plan.
If you are able to do all of the above, you can be sure that your child will have a head start in their personal finances and the financial discipline instilled would carry them through life, turning them into a financially responsible and savvy adult.