Every year, there’s a day in April designated to helping children to learn how to save. However, if you’ve ever sat down with a child and discussed the ins and outs of financial freedom with them, then you’ll know we need a lot more than one day a year. Ultimately, children don’t get the education they need to help them make the most out of their money as they grow.
More often than not, the issue of finances and spending is brushed over in school, which means that parents are left to handle the task of teaching children how to manage money on their own. If you’re worried that your child isn’t going to get the guidance that they need, here are some tips that will help you offer a better education.
1. Focus on Wants vs Needs
The first step in successfully teaching your child how to save money is teaching them how to understand wants vs needs. For instance, explain that their needs are the basic things that they have to have to survive, like food. However, food can be anything that sustains them. Takeaway, sweets and other treats are a “want” even though they stem from a need.
For the things that your child wants, help them to understand that they’ll need to set long-term and short-term savings goals. Sometimes, they’ll just need to wait until they get their weekly pocket money to afford their wants. In other circumstances, your child might need to learn the benefits of delayed gratification and saving towards something over time.
2. Let Your Child Earn Their Own Money
When your child is still very young, they’re probably not going to go out and find a job. You’re going to need to wait until at least their early teenage years before your youngster starts earning a wage. However, that doesn’t mean that you can’t start to teach the benefits of an earning an income from an early point.
For instance, if you want to give your youngsters money to spend on the things that they want, consider giving them a weekly or monthly pocket money. Rather than giving your kids that cash for no reason, give it to them in exchange for doing chores like cleaning their room, or taking out the trash. This way, they’ll learn the benefit of working.
3. Act As Their Loan Company
The chances are that you’ve needed to take out a loan every now and again to help you pay for the things that you need. With the economy the way that it is today, your children might need to do the same thing when they grow up too. With that in mind, if your child asks to borrow money from you for something that they desperately want, acting as their creditor could be a great idea.
For instance, agree to give your child £40 for a game if they give you £44 in return. You can put the extra £4 into a savings account for your child and start to teach them about things like interest. Asking for interest might seem like a strange tactic at first, but it pays off in the long-term.
4. Talk with Your Child About Money
Part of being a good saver and a savvy spender means understanding your money and where it goes. When your child starts getting their own pocket money or they earn a wage from their new job, invite them to sit down with you regularly and do some basic budgeting. During this time, you can teach your youngster about the expenses that you need to consider when sorting through your cash each month.
Budgeting with your child also helps to open up a dialogue about money. It’s important that your child knows that they can talk to you about their concerns and uncertainties around cash, without feeling overwhelmed.
5. Set a Good Example
Finally, remember that your child will always be looking to you for examples on how to behave. If you want your child to be careful with their cash, and avoid impulse spending at all costs, then they can’t see you constantly buying extra things online whenever you fancy. Make sure that you plan each of your purchases carefully and think about the impression you’re having on your youngster.
Be prepared to answer questions that your child might have, and if you set any rules for them on how they need to use their money, make sure that you’re following the same guidelines.