Why teaching our kids healthy money habits is getting harder and some tips on how to start.
The Mystery of Money
To children, many things can seem foreign. As they take in the world around them, the man-made environment has rules and notions that may not seem logical.
For children, one such concept is that of money. As adults, we don’t think much of it, but to trade something which is valuable like groceries, for nothing more than a piece of paper or a small piece of metal doesn’t seem right.
And this concept of money could not be any more true today. As we move into a more cashless economy, a simple wave of a piece of plastic or a tap on your phone can be exchanged for almost anything. As the tangible nature of money becomes more obsolete, the ability for your children to see the value of an intangible asset becomes harder.
You want your children to have the skills to make smart financial decisions. You tell them about the importance of saving or the power of compound interest. But it’s getting harder to show children the value of money.
It is important to establish this life lesson as early as possible. To assist you here are four common ways you could teach your children healthy money habits.
1. Revealing the magic behind digital money
Your children have likely seen you pay for hundreds of transactions without glimpsing cash changing hands. For small children, it can seem like money problems are solved with magic – just wave or tap a plastic card. This makes it important to discuss the value of money with them. A good way to start is to explain how your earnings get deposited into your bank account and how you use this account to pay bills. For older children, consider showing them how taxes are deducted from your salary.
2. Spending wisely
Frequently buying things on an impulse could send the message that it’s fine to spend without planning. Sticking to a budget is key to avoiding impulse-buying. To set an effective budget, consider working with a professional adviser or using the government’s Moneysmart calculator. Your adviser can develop a budget that factors in your income, expenses and financial obligations.
3. Teaching them independence
It’s convenient to do everything for your children. But by giving them a chance to have their own money and decide how and where to spend it, they could learn powerful lessons about budgeting. In this digital age where physical money is not so the norm, there are debit card-like products. These can teach the importance of budgeting while still giving the parent full control.
For adult children, always offering them financial help can create a cycle of dependency. Letting them make their own money decisions could help them develop financial responsibility.
4. Including them in budgeting
Many parents keep household financial planning and budgeting to themselves. While you don’t have to fully involve your children in managing your family’s finances, giving them a role to play, such as getting them to do grocery shopping using a set budget, can teach them lessons about money. If your children are old enough to earn some income, why not help them set their own long-term financial goals?
Using your influence positively
You can strongly influence your children in relation to money, so it’s important to pass on smart money management skills. If you don’t know where to start, consider reaching to us at Discovery Wealth Advisers to help you stay on top of your finances through proper planning and budgeting.