Financial experts around the world all agree that understanding cash, credit, and consumerism is possible, and important, for building a sense of financial responsibility in children. Educating, motivating, and empowering children to become regular savers and investors will enable them to keep more of the money they earn and do more with the money they spend. Everyday spending decisions can have a far more negative impact on children’s financial futures than any investment decisions they may ever make. And when it comes to learning about money, how you act with it and what you say about it is perhaps the most influential thing you can do to instruct your child, which means your actions and words about money should always be as consistent as possible (which is harder than it sounds!).
Here are Rupert and Richard’s handy tips when it comes to teaching your offspring the all-important value of money!
When a child can count, introduce them to the concept money
Take an active role in providing them information, as observation and repetition are two important ways children learn.
Communicate with your kids as they grow up about your own values concerning money
How to save it, how to make it grow and most importantly, how to spend it wisely.
Help children learn the difference between needs, wants, and wishes
This will prepare them for making good spending decisions in the future.
Take your kids to the bank to open their own savings accounts
Beginning a regular savings habit early is one of the keys to savings success. Remember, don’t refuse them when they want to withdraw a portion of their savings for a purchase, this may discourage them from saving at all. The process of opening an account is an easy one wherever you happen to live so there’s no excuse to putting this off!
Saving for a sunny day
The cornerstone of healthy personal finance is also something many people struggle with: saving money. From the time your kids are old enough to want toys, books, and other entertainment items, you should teach them how to save for the things they want to buy. An allowance is a good tool for this concept and almost all-personal finance boils down to this essential concept, and it’s best to learn from experience.
Work hard for your money
Help your child make the connection early in life that money isn’t something freely given, but is earned through work. We would suggest emphasizing that nothing comes free, even if you’re tempted to bestow upon your offspring everything that their hearts desire. If you choose to give your kids an allowance, tie it to the successful completion of certain jobs throughout the week. Or you may choose to set a market rate for various tasks.
Age-appropriate chores and rewards are the key. Younger kids can help with simple things like setting the table, where doing the job well isn’t as important as learning how to see it through. Older kids can take on more arduous tasks, like mowing the lawn, in exchange for greater compensation. You may even encourage them to begin offering their services around the neighborhood.
Understand a budget
A budget is a foreign concept to kids (and, it should be said, to many adults). Younger children especially, simply won’t realize that mum and dad have a limited amount of money to spend every month. But learning what a budget is, and why it’s a good idea, is one of the central pillars of financial literacy. The best way to teach kids how a budget works is simply to show them by conveying a broad sense of how adults have to divide up their money each month.
Paying an allowance
The best-proven way to teach budgeting is to give children an allowance and make them learn to use it wisely. You and your child need to be absolutely clear what the allowance covers. If you want to make restrictions, agree on them clearly in advance with your child. Agree as to what happens if there’s allowance leftover.
Your child will take a while to learn how to budget, and will need your help. You can’t just hand the money over and be done with it. To start with, make the allowances little and often. If they run out of money through bad management and you bail them out, they’ll learn nothing. So don’t bail them out if you can possibly help it. If you have to, make sure it’s something they won’t want to happen again.
There’s no one dollar amount that’s appropriate for all kids. The amount you decide on should be sufficient to provide your child with some extra money so they’ll learn how to handle it. There’s no educational benefit in setting an allowance at an amount at which it’s already decided how it will be spent before it’s even received.
For more info on family wealth managemennt, go to www.acuma.ae or call 04 332 8582.