Today, it’s more important than ever before to save for the future. With so much uncertainty, and somewhat gloomy economic prospects - being prepared means that both you and your children will be able to steer around financial problems, or any difficulties that might come across your path.
As a parent, you want the same for your children when it comes to their personal finances. Yet, having a firm grip on how to navigate the uneasy road of personal finance in the modern day is no straightforward task. There’s a high chance your children are not merely as worried about money, or budgeting as you may be.
So to ensure your kids have a good understanding of how to work with their money and save some of their earnings to make a large purchase. Consider when the right time would be to talk to your kids about finances and budgeting.
For some children, especially those looking to move out of the house very soon - personal finances can seem like a daunting undertaking, so allowing them the opportunity to learn from you from an early stage or point in their life will take a lot more stress off their shoulders.
Consider the following 5 habits of personal finance that you can teach your children.
Start with the Basics
Whether your children already started earning their own money or not, start with basic guidelines on how to work with what they have. When it comes to both spending and saving, make sure that there is a clear distinction between how much one should be saving up, and what is available to spend on other activities and goods.
It might seem that you’re confining your children’s financial freedom, and how they should spend their hard-earned money - but on the contrary, one can see the basic principles of personal finance as a guideline. Through this, children will be taught that although money is constantly coming in, making more important payments first will allow you to see how much money one has at your disposal.
Teach the value of money
Some parents have found it easier to teach children about personal finance once they have explained the true value of money.
But what is the value of money and how do you explain it?
Well, money can mean a lot of different things for various people, but ultimately one can consider how money can be used as:
- Medium of exchange
- Unit of account
- Store of value
From these three focal points, parents will be able to instill an understanding of how money can be used to purchase and pay for goods or services. There are of course underlying complexities that can make it seem more challenging to explain, but mainly one should focus on how you use money, and how it impacts your personal finances.
Make saving a habit
For those of us who are fortunate enough to have saved up some of our earnings, creating a habit of saving for your children gives them a clear indication of how spending less now, can give them more for later.
More so, it puts them in the position to save up for that first car, or perhaps a down payment on a house or a student loan. Whatever the purchase, make that the goal. Saving takes discipline and is a skill some adults still struggle with. One can either make use of traditional saving models or perhaps dabble into some of the various online resources currently available.
Teach them about investments
This is an interesting topic that has become more commonplace among younger adults looking to diversify their savings and monetary flow.
Teaching children about investments, and how to allocate the right amount of money for an investment opportunity gives them more than one channel to build a better financial understanding.
There are different investment opportunities, so having your children be aware of each, and understanding the basics of each is already a massive step forward.
Show them the positive and negative aspects of money
As we all know, money can impact our lives in many ways, and through means of personal finance, we can establish a positive and stable financial position.
Bringing together pieces of both positive and negative aspects of money grants you the opportunity to teach your children ways in which money should work for them and not against them. Their finances should be in a condition that allows them to become financially prosperous, and set up a budget for future endeavors.
In many ways, we understand how children look up to their parents as their role models, thus one should practice what you preach. Be sure to teach children valuable habits of finance, and how they can grow their personal finances, become independent early on in their lives, and help build their knowledge.
Finances shouldn’t be something one should be intimidated by, as it forms part of everyday life. Being able to juggle different hats, gives children a clear picture of how money works, and how you can instill habits which would make them financially prosperous,