Money worries seem to be part of the fabric nowadays. Between rising household costs and (relatively) shrinking wages, financial literacy has become more important than ever. This is food for thought for us parents, too, as it brings into question the world our children will graduate into. What can we do to prepare them?
Teaching good money management skills is a good place to start, but can be a difficult thing to do. Not only is the subject a little dry, but also a little complicated. Nonetheless, doing so could be crucial for their future financial well-being. By teaching them the value of saving from a young age, we can empower our children to make informed decisions, develop responsible habits, and chart a safe course through newfound independence. But how?
Introducing Earning Opportunities
In order for your child to learn about money, it’s probably wise to ensure they have some first. Start with teaching the value of money, and its purpose; then, you can move into empowering your child through opportunities to earn their own money.
You might give them a chance to earn some pocket money by helping out with housework, or you might incentivise focus and achievement at school with money. Allowing your kids to earn their own income can show them the value of hard work and financial independence, instilling a sense of ownership over their money in the process.
Goal Setting and Saving
With earning opportunities established, you can next broach the subject of saving. Try encouraging your kids to save money, starting with some conversation on the concept of delayed gratification – and maybe an example of how you have saved money before. By helping them identify a specific target, such as a toy or a game, your children can learn the value of patience and discipline.
Opening a Savings Account
Of course, your children will need somewhere to put their hard-earned – and loose change won’t cut the mustard for very long. Now is a good time to introduce your child to the concept banking, by opening an account in their name for savings. You can teach them about the purpose of their account, and how money placed in it can increase passively through interest. They might be too young for digital banking and standing orders, but you can drip-feed this stuff over time.
Spending, and the Value of Making Mistakes
Ultimately, there is only so much you can tell your kids before letting them loose on their own. Giving them the freedom to make their own purchasing decisions with their savings can be valuable in two ways: they get hands-on experience with financial decision-making, and they get an uncompromising lesson in frugality if – or when – they make a mistake with their spending.
You can give some pearls of wisdom here, through Introducing basic money management skills such as budgeting. This is a good way to prime them for more adult conversations and decisions in the future too, all of which helps build a robust understanding of financial literacy and its importance.