Money management skills lay the foundation for lifelong success. The path to financial literacy in children should start early and should start with you as a parent. With you as a family. Financial wisdom comes step by step and settles well over time.
We were deprived of the best premises as a generation. Our parents did everything they could in those times. Somehow taught us more about spending less than about balanced financial decisions.
In an era of consumerism, where parents need to constantly explain what is worth and what is not worth purchasing and bring real added value, from minimal purchases of sustainable clothing to why we shouldn’t drink from plastic cups or buy all the available gadgets or toys parents have a really difficult mission.
The repercussions of a lack of early financial education can be multiple. They leave traces in the adult’s financial decisions or insecurities and even accentuate chaotic consumerism.
Parent’s financial education pattern- Not a good inheritance?
Parents’ relationship with money becomes an example for children, as it happens in other aspects of education or relationship, including emotional ones.
Many words, parents’ dilemmas, and more. So how do we actually raise children financially wise?
Part of being a strong financial role model for kids of any age includes understanding the dynamics of money. Having a sound financial education and each family’s unique way of relating to money becomes patterns from early childhood.
Your child may learn to replicate the family’s relationship with money or become the opposite of you as parents.
However, patience is key here as well. Think about how long it took you as a parent to understand and apply useful financial concepts. Even we as adults need the help of a financial coach.
When it comes to financial education, the reality is that there is a lot to learn by the age of eighteen and apply even by the age of 30…100! Financial responsibility cannot be learned in a year or just a few classes at school. It is learned throughout life, starting with family habits.
Start at home. Start with you.
Teach financial responsibility through independence!
One of the best methods of learning is hands-on experience. Get kids involved as early as possible in managing their own money (with proper supervision, of course). It is important to introduce new age-appropriate responsibilities on an ongoing basis as the child grows.
Financial items they can focus on can include everything from valuing the importance of work, making purchasing decisions, and managing an allowance through budgeting. Also saving for short and longer-term goals, to learning about banking.
Show children how to have a healthy attitude toward savings
Promoting a strong saving ethic is one of the most valuable lessons you can teach your child. Learning to spend less than you earn is the foundation of financial success, and learning to set and achieve goals is a fundamental principle that applies to all aspects of life.
There are lots of ways to support and teach your children the value of saving, starting with building up a spare (piggy bank) in early childhood, then equalization /balancing savings contributions from later earnings and saving for college or other goals.
It allows learning from mistakes
I have compared financial education and investments with various sports, but for children, I recommend that you explain things by thinking about how is to ride a bicycle. Learning about money is somewhat similar: you have to fall a few times to learn how to get back up, and at some point, you probably don’t need the training wheels anymore.
Allowing your kids to be directly involved in managing money, money family decisions is ok. The natural possibility of mistakes along the way is okay also. Just make sure you offer constructive advice and support in these situations.
One single recommendation that might seem strange when we speak about personal finances, is to allow children to go into debt. Provide them with a controlled environment, of course. This gives them a valuable opportunity to learn about:
- loans and interest,
- getting out of debt, or better yet, ways to avoid it
Create realistic expectations
One of the best things you can do is help your children understand how much real-life costs. In particular, help them figure out how much money is needed to maintain their current lifestyle. It is important to pay attention to the expectations your children develop over time. The lives they live now lay the foundation for what they will hope to achieve as adults. Whether you’re wealthy or simply enjoy creating experiences and opportunities for your children, it’s important to be aware of the possible “Wealth /Affluenza effect vs. the Real well-being.”
Be a great manager of your finances
As with all other aspects of parenting, you must constantly imagine yourself in front of a mirror. Ask yourself if you are setting good financial examples for your children. Regardless of your child’s age, you are the biggest influence on how they perceive money and approach finances.
Have frequent and open discussions with your children. Talk to them honestly about what you’ve achieved financially.
- lessons you’ve learned
- financial experiences that resonated with you
- sage advice for financial success
Always try to discuss money positively and lead financially difficult situations with positive examples. It appeals to the differentiation between needs and wants.
In short, don’t forget what you can do for your children’s financial education:
- Involve them in establishing the family budget
- Consider the need for a fixed allowance for them; if possible, the allowance should be regular and preferably a fixed amount
- Teach them responsibility for buying/saving
- Talk to them about setting goals
- Teach them to well differentiate ‘’I need’’ from ‘’I want’’
- Help them earn extra money
- Add other methods to the list or call a financial coach for personalized advice
- Don’t forget to give them feedback (don’t be afraid of praising them)
Be aware of how you manage your money, how you pay for things, your stress or exuberance when shopping, and even the subtle comments you make about your finances, family members’ earnings, other people’s money, your job, and pay.
When you run out of answers or need personalized ones, turn to the advice of a coach for a better financial education passed on to your children you can be part of a complete financial well-being program.