Moms, teach your children to be money smart in 6 easy tips
Every mother wants to ensure that their children are prepared with all the necessary life skills to face the many obstacles and challenges of adulthood. One of the most important life skills that a child must learn, is how to manage their money. Personal financial management is often something that many adults simply cannot do, and it doesn’t matter if you a CEO or a janitor, if you cannot manage your money properly, you will run into financial trouble at some point in your life.
To help you better prepare your children for the future, Cornerstone Investment Advisory Services has put together a neat set of tips on how to teach your children to be money smart.
Evaluate your own attitude towards money
Children are like sponges and they learn a lot from observing everything around them – especially from you as their parent. If you are constantly referring to money in a negative light, chances are your children will develop the same feelings, which might hinder their ability to run their finances successfully and have a chance at being financially independent.
It’s very hard to teach your children the right way to managing money if they keep seeing you managing your monies unsuccessfully. If you tend to be a little irresponsible with money (i.e. unnecessary loans and credit card debt, no emergency funds etc), try to mend your ways so that your children can learn from your mistakes and avoid these pitfalls in their future.
Lastly, don’t be scared to admit if you don’t know how to handle certain financial issues. Teaching your children to know when and where to find expert advice is extremely valuable.
Ensure your children understand that money comes from hard work and that there is no such thing as “becoming rich quickly”.
The youth of today are faced with many social media pressures – “instant gratification” and experiencing social media celebrities making it “big” – attribute to giving our youth the perception that it’s easy to build large amounts of wealth in a small space of time. A good way to ensure that your children understand how money is made, is to reward them for helping with chores around the house and when they are older, to help them find a part time job. Not only will this teach them valuable interpersonal skills and discipline, it will allow them to experience the freedom and responsibility of earning their own money.
Provide your child with a regular set allowance and allow them to spend it their way
Giving your children a regular set allowance will teach them to make wise purchase decisions, to plan for larger purchases and to compare prices of different items in order to make their allowance last longer. Encouraging them to keep an account for their purchases/expenses as well as their regular allowance, teaches them the importance and skill of running a well-structure budget.
For this to work, it’s important that you don’t give in when your children ask for more spending money because their allowance is depleted – they must learn to manage their own spending.
If you are unsure of how much your children should be ‘earning’ from their allowance, here’s some good tips to follow:
– Be sure to only give them an allowance that you can afford.
– Decide beforehand what they need to buy from their allowance. For example, will they have to buy their own toiletries, or will their allowance be simply for socialising and spending?
– Carrying cash is not always the safest way to keep money. Rather open a savings account for your children to ensure that their money is kept safe and sound.
– To avoid the cash element even further, you can also add “non-money” elements to their allowance, like airtime or data.
Teach your child to save regularly and educate them on wise investment choices
Establishing a savings culture is crucial if one every hopes to achieve any degree of financial freedom. Cultivating a culture of saving in your child’s life will help them immensely as adults. Encourage your children to save a part of their allowance towards something special (a goal) is an invaluable financial management lesson. Even if it’s only a few rand each month. This will instil a sense of frugality in your children that will develop into the financial discipline they’ll need as adults.
Cultivate a healthy attitude and understanding of credit
With over indebtedness becoming a bigger and bigger problem in South Africa, making sure your children understand the effects of too much debt is vital to their future financial wellness. Ensure they understand how debt works, the impact of interest and that buying something on credit is much more expensive than saving for it.
However, be weary of making them fear debt, because not all debt is considered bad. What they need to understand is that debt, like all other aspects in personal finance, must be managed carefully to ensure that it does not become a financial burden. Short term debt like store cards and credit cards should be avoided at all costs, but long-term debt like a home loan or a car loan is acceptable when managed well.
Involve your child in your own financial planning
When you are doing your own budget, comparing prices while grocery shopping or balancing the books of your business, it’s a good idea to involve your children. Showing them the practical application of well managed finances, will make it easier for them to apply it in their own lives.
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