Money management and financial literacy is perhaps one of the most important mental skill sets that an adult human being can have. Unfortunately, it is often something completely left out of secondary education and many families fail to properly instill in their children the values and concepts related to money management.
If you are interested in giving your child a financial leg up, below are some important tips for teaching them about money management.
Set ground rules.
Anytime your child has money to burn, whether from a birthday, a holiday, or a part-time job, it is always a good idea to have them calculate exactly how far that money will go. If they are interested in a new iPod or a jacket at the local mall, have them go online and find out how much the item costs beforehand, including the tax. This will give them a better idea of exactly how far a fixed amount of money is capable of going.
Become a savvy shopper.
Being a savvy shopper is the exact opposite of being an impulse shopper. Teach your children about bargain and sale hunting, and let them know that second hand, or used goods can yield hidden gems that are just as functional and aesthetically pleasing as a brand new items. Just because something is immediately available, doesn’t mean that it is the best value for your money.
Set an early foundation.
While giving your children the autonomy to think and do for themselves is fundamental to creating high functioning, capable adults, they do need ground rules to ensure that they develop healthy habits. Their finances are no different. Provide guidance with your children’s finances, making sure they know that, not only will they have to work for what they want, but that that money is not 100% disposable. Have them set up a savings account or have them place a certain percentage of their earnings or birthday money in a GIC or government bonds to teach them about investing and growing their money.
Set a good example.
Your actions speak louder than words. Let your children see how you go about handling the finances of your home. Give them a good idea of where the money comes from, and how it is dispersed. Let them know that everything (from the lights, to the phone, to the TV and Internet) costs money. Money that you had to earn. Have them see that being responsible with your money is a prerequisite to living a less stressful life.
Teaching your children basic financial literacy and responsibility from an early age will help turn them into fiscally responsible adults. Knowing how to manage, invest and save money are life skills on par with writing a resume and cultivating relationships.