It’s important for children to be wise about spending and saving money from a young age. This allows them to be less dependent on you as parents in the future. Instilling healthy financial habits will also encourage them to grow into responsible teenagers and adults.
In addition, they will also become financially literate individuals with the ability to understand topics related to managing personal finance, money and investing. Having little knowledge on finance may lead to dire consequences down the line such as being broke, having debt and bad credit, as well as borrowing money from dangerous sources as a last resort.
Here are five ways to instil good financial habits in your children:
1. Teach them about the value of money
Children may not understand the concept of value especially when it comes to money. What is the difference between RM10 and RM100? You can break down the concept of value by using examples such as equating the price of a new iPad to 20 toys. If your child is old enough, you can reward them with a small payment when they complete simple tasks such as making their bed or folding their clothes. This makes them understand the value of money which is earned instead of just being given to them.
2. Encourage them to save money
If you already give your child a monthly or weekly allowance, encourage them to set aside a certain amount of it. You can explain to them about the power of accumulating money instead of spending it all at once. In addition, you can set up a savings account for your child. It’s also fun to let your child save their money to buy something that they want such as a new toy or a pair of shoes. They will be excited and proud to finally purchase the thing that they want after months of saving.
3. Involve children in every day money-related tasks
Don’t make money a taboo subject with your child. Instead, make sure to involve them in everyday money discussions when you run errands. You can include your child in activities such as grocery shopping or withdrawing money from the ATM machine. Another fun way to bond with your child is to research and discuss money-related topics together. For example, differences between a debit and credit card, investments and so on. Talk to your child about having good security habits when it comes to pin numbers and passwords.
4. Make allowance a lesson
Don’t just give your child an allowance but make it a lesson overall! Tell them to divide their piggy bank into four sections, namely for spending, saving, donating and investing. When it comes to spending, your child can spend it all until there is nothing left. As mentioned earlier in the article, help your child have a goal they can save towards to and make sure they meet that goal. Your child will also learn the value of giving back by setting aside some money to donate to a charity of their choice. Besides that, your child can keep a small amount of their allowance for investment purposes in the future.
5. Find the fun in finance
It’s crucial to make learning about money a fun experience for your child. Look out for exciting online games and apps you can access with your mobile device. You and your child can also attend workshops related to financial literacy such as the one offered by MoneyTree. In addition, you can also take the time to visit a financial advisor with your child to get expert information.
Besides the tips mentioned in this article, the best way to instil good financial habits in your children is to have good financial habits yourself. Children often look up to their parents and view them as role models. Therefore, it is important to practise good financial habits such as having a budget, avoiding impulse purchases and having a savings account.
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