Many would agree that financial matters and debts are only an adult’s problem. Adults are bombarded with ballooning credit card debts and student loans. According to reports, an average American owes almost $93,000 in debts. It’s somehow scary to think, given that you’re supposed to maintain good credit scores.
But just like any other problem, huge debts are preventable. Good finance management is the key. But what about starting the prevention early? Maybe, mastering financial literacy is essential. But you can only master something if you start young.
You might have kids now, and you don’t want them to end up drowning in debts when they grow up. In that case, you may want to teach them financial management at a very young age. But how can you do it? Here are some tips you can try to teach your children about handling finances.
Help them open a bank account
Plan to bring your kids on your next trip to the bank. Opening a kid’s savings account can be a learning experience for your children. Keep in mind that you can either open a custodial account or a joint account with your child. This is going to be based upon the state where you live and your bank. You may want to talk to a banker about your options.
What’s great about a savings account for your kids is it can teach them about bank processes. Banks also have several ways to make baking exciting for children. This could make saving a fun activity for them. It’ll be a great help to teach your kids about growing their savings and setting goals.
Teach them about cost-cutting
There are times when children want to buy something so bad. You can let it slide every once in a while, but you should not tolerate it. They’re kids, but they have to understand that money doesn’t fall from the tree. All the things you buy are products of your hard work. And if something isn’t deserving of the expenses, you can’t buy it for them.
Show them the things that you prioritize most. Then show them things you can’t buy because you’re cutting costs. Your kids should know that expenses should be based on the family’s top priorities. That they’ll need to make sacrifices by cost-cutting if the funds are not sufficient.
Use academic learning
Teaching money management in schools is being implemented in some states. They’re somehow trying to catch on. Education about money is very important cause it’s the foundation of financial literacy. There may be charter schools or any public ones near you with financial literacy subjects in their curriculum. You might want to check that. But whether it’s being taught in your kids’ school or not, you can still contribute to their learning.
Do this by using their lessons as part of your money management lectures. Use Math problems for them to solve. Incorporate budgeting in those Math problems. Ask them about what they learned on the law of supply and demand. Give them real-world examples that they can associate with them as kids who want to manage finances. This way, they’ll know that financial literacy can be relevant to whatever they’re studying in class.
Involve them in budgeting
One task you can involve your children in is budgeting expenses in the house. This is where they’ll see how much you’re spending to keep the electricity on. It’s where they’ll realize how much money you’re sparing for utility bills. They’ll also know the amount you’re saving to keep your fridge full. Teach them what goes behind the scenes.
It will help them fully understand that managing finances in your house isn’t simple. You’ll have to show them how you balance expenses and still manage to keep something for your savings. This is where you can set a good example to your children on how to set priorities properly.
Have them practice budgeting on their own after giving them an example. Give them their “salary” and see how they’ll budget this based on what they prioritize. Next thing you know, they’re avoiding candies to save for a new toy.
Give them rewards for saving
Teaching skills to a child may become more effective through positive reinforcement. You can apply this by giving them rewards after a successful attempt at a finance handling task. For example, make them save $10 for a week, and you’ll give them $10 as a prize. That can imply the idea of getting more if they’re willing to save more.
That’s how sales and discounts work anyway in the real world. Give them prizes for completing a money management task. It’ll inspire them to save more.
Children’s knowledge about money is limited because they’re not working for it. If you can at least teach them how to save, they’ll learn how to be financially responsible while they’re still young.