Teaching kids about the value of money and power of investing early in life can help them to learn healthy financial habits that could last a lifetime. The more knowledge they know, the better they can make informed decisions about their finances. Children often get gifts in forms of money and other items from callers to their homes. It will be wise for parents to inculcate in their children the habit of saving early in life.
Research shows that for many children, their attitude towards money later in life are mostly formed by the time they are 7 years old and.
Parents as example
Children are very adept at picking up both verbal and nonverbal cues about how their parents are handling the finances at home so it’s important to keep that in mind as you bring up finances. They are not only learning how you interact with money but are forming behaviors they will likely continue for years to come. While it is okay to discuss money around your children, try to pass down positive attitudes you would like them to adopt, not ones you would like them to avoid.
Introduce them to Piggy Bank
The piggy bank encourages saving because it provides children a physical place to store their money. And, unlike a savings account, which is a more difficult concept for many young children to understand – the piggy bank is tangible and the funds are readily available. Plus, counting the money will lead to saving more. The whole process allows the child to experience the satisfaction of saving money at a very early age. Parents can then use the piggy bank to help their child set financial goals and with guidance from an adult, the child can dream and plan about when and how to spend the money.
Introduce them to the magic of compound interest
As the child grows, there is need to introduce them to the concept of investing. Compound interest is the magic wand, introduce it to them at an early age, and they will get a head start on preparing for their future.
Investing is a tool for building wealth, but it is not only for the wealthy. Anyone can get started on an investing program, and various vehicles make it easy, to begin with small amounts and add to a portfolio periodically. In fact, what differentiates investing from gambling is that it takes time it is not a get-rich-quick scheme.
Emeka Anezi, a personal finance coach said parents and guardians should begin to teach their children the value of saving money from an early age so that they could realise early the practical advantages involved in doing so.
“The ‘spend-it-all-at-once’ mentality in our children and youths need to be checked and one of the ways to do so is through the introduction of a proper saving culture. As parents, we are duty-bound to make our children understand that they must begin to save money at some point in their lives,’’ he added.
Teach them to avoid impulse buying
Teaching them the difference between Needs and Wants early will also help improve their spending habits. For young children, this is the first time they start to recognize that others may have more than they do. When you’re in the store and your children are asking for a new video game or piece of clothing, instead of just tossing it into the cart, talk to them about whether it’s something that’s really important to them or if it’s an impulsive financial purchase. Helping kids to draw up their budgets could help demystify the complexity between needs and wants.
Encourage them to earn money
Teenage years are a great time for kids to start finding a summer job to supplement their allowance or gifts that they get throughout the year. While the familiar summer jobs, like working at grocery stores or retail, are still popular, there are many opportunities for older kids to make an income online or by getting entrepreneurial on their own.
Use a summer job not only as an opportunity to start the conversation about budgeting and finances but also about the responsibility of earning money and saving it.
Learning is a continuous process
Learning about money is a continuous pursuit and there are lessons to be learned at every step of the way. Before they leave the University and enter into the workforce, helping them understand their own relationship with money can help them succeed both when they first make it out into the world and for decades to come. Encourage them to ask questions when it comes to money and create a safe environment where they can come to you about it.
