Three steps to your kids’ financial success
We all want to give our children a head start in life. This three-step article will help you to instil sound financial habits in your children by setting the foundations of good money management now. All parents want their children to be better-off than they were – more secure and financially independent, but the big question remains: where do you start?
Ushering your children towards financial security can be a simple three-step process.
Step 1: Create good habits
Start early; learning to save is one of life’s great lessons. In an increasingly cash-less society, it can be difficult for children to understand the value of money and how to save.
Help them by:
- Providing a glass jar through which they can see their savings mounting up for very young children.
- Teaching the difference between needs and wants. Lead by example with your own savings habits.
- Involving them in the household budget; compare prices at the supermarket and demonstrate bill-paying.
- Paying pocket money for age-appropriate chores and helping them to create a mini-budget, apportioning money to:
- spending on anything they want.
- donating to charity to instil a sense of community and empathy,
- saving for a goal; helpful in teaching kids restraint and how to avoid impulse buys.
Step 2: Inform
Nothing is free; water in the tap, electricity and even the internet don’t just happen by magic. One of the best ways to teach kids about responsible money handling is to explain debt and the consequences for not meeting financial obligations, which segues neatly into a discussion about personal credit scores.
People with better credit scores find seeking finance approval easier and often qualifies them for more advantageous lending deals.
Helping kids understand the concept of a credit score can be a little daunting, so try these tips:
- Brush up on your knowledge first.
- Don’t focus on numbers, explain that it’s about financial behaviour over time.
- Avoid complexity and keep the information age-relevant.
- Use examples. Discuss mistakes you’ve made in the past and explain how you rectified them. Explaining to them the rationale behind some of your financial decisions will help instil good values in your child.
Step 3: Educate
By the age of 3, children can understand the concept of money. By age 4 your child should be able to understand the connection between money and things. You can help them by making shopping lists and bringing them to the store, this will help them make the connection between money and things at home. By age 6 you can teach them the connection between work and money, you can help them by paying pocket money for age-appropriate chores.
With early financial education, children will be more comfortable talking and learning about finance. Searching online will reveal a range of websites, blogs and apps dedicated to engaging and educating kids about money and investments. These online resources can help in the process of educating your kids about the different types of accounts or investments available in the market to help grow their finances.
Introduce your kids to good habits while they’re young, and you’ll be setting them up for success.