Money management can be a difficult thing to be understood by children. You can't expect kids to know about interest rates, rebates, discounts, debts or savings percentages. Thus, it takes patience from smart parents to cultivate the habit of saving and nurture the right attitude towards money.
Here at GoBear, we'd love to share our thoughts on how smart parents can start teaching their children to become financially literate early on.
Here are eight ways you can do to kickstart this mission:
1. Be the role model
It may sound like a cliché, but parents are kid's living examples. As James Lehman once said, your kids watch you for a living. It is their job, and it is what they do.
And your job? Be the parent who's good at handling their household's finances. Don't let your children hear you talk to collection agents or watch while your car's being repossessed and pulled out from the garage.
Setting a good example is a crucial part of parenting. Let your children see how you take care of money by not wasting food on the table, and turning off unused appliances.
2. Demonstrate the value of money
Show the children how you can live a simple life you can afford. Demonstrate how you make choices and explain why you chose such. It helps a lot to let them understand why one toy is better than the other and why one gadget is more practical than the rest.
At the supermarket, take out two kinds of ketchup. Explain the differences in pricing and ingredients and let them choose. Tell them how brand, parts, and packaging can affect the cost of a product. Try to use age-appropriate language and terms, so your message gets through clearly.
3. Teach contentment
Children would typically fight for what they want, especially now that social media and the internet has shown the possibility of almost everything. As parents, you need to instill early on that material possessions are temporary. Teach them to value what they have and be thankful for it. Anything they have that is working as planned should not be replaced — contentment springs from the heart and from knowing the differences between necessity and luxury. Show children how contentment can make someone really happy.
4. Involve kids in the family budget
Let the kids see the bigger picture of costs and spending by getting them involved in the family budget. Show them the price of one meal per day and let them understand how this could affect the spending every week. You can also show them your billing statements for electricity and other utilities. Let them compare your monthly account and ask them how they can help reduce your consumption.
Make the children's involvement more fun and challenging by asking them to make a list of meals they want for the week. Each meal should have a corresponding cost. If you have time to spare, take them to the grocery store so they can choose the ingredients. This will initiate their willpower to decide on small things based on budget and practicality.
5. Learn to say no
Some parents would instead buy that new toy than suffer the outbursts of their children. This usually leads to unnecessary pampering and spending. Learn how to handle children's disappointments when you say no to what they want. Offer alternatives and show them what happens if you heed to their desires. For instance, explain to your kids what might be sacrificed if you buy them a new pair of shoes. Tell them you have the money but using the money for a new pair of shoes might prevent you from spending for that family getaway this weekend.
6. Teach children to save
Whether it's through a clear jar or a real savings account, your kids should learn to set aside a portion of their money for emergencies. Clear jars are best for toddlers until such time that they won't need to see how their coins are piling up. Savings account are best for teens who gradually learn to access their accounts online through the bank website or mobile apps.
Let children appreciate the importance of having extra cash for emergencies. Help them save for a goal, especially that Christmas is coming. Ask your kids to make a list of items they want to buy and let them find ways to save and be able to buy what's on their list.
7. Track their spending
Ask your kids how they spend their baon every day. Let them make a list of the items they spend on even up to the most inexpensive ones. Tracking will help them know where their money is going. Identify the needs and wants from the listed items and let them avoid the "wants" in the succeeding weeks or months. At the end of each month, review their list and see if they saved enough.
A problem with money chooses no age. Teach children about the value of money so that when they grow up, they will appreciate the fruits of their hard work. Understand that it won't be perfect right away. Leave room for mistakes and improvement. Money management and financial literacy as a whole is a process that may take years of learning experiences.