Parents everywhere want to see healthy financial habits in their children and often put a lot of thought into how to achieve this.
The best way to inculcate money values and beliefs in your child is to teach them about it. This is one area where the old adage “practice makes perfect” is true. Money values are typically learned through family conversations and hands-on teaching and when a child observes how their parents spend money.
Here are 10 practical tips to start inculcating money values and beliefs in your child.
- Give children a piggy bank and teach them how to save.
Your child a piggy bank and an allowance each week. Encourage them to put some of their allowances back. This will teach your child the value of saving instead of spending all at once. You can also help teach them about interest rates, as they’ll be able to witness their money grow over time if they keep saving regularly.
Encourage them to set goals and work hard towards achieving those goals through saving up and investing wisely.
- Set an example
If you want your child to learn about money, then you should set an example for them by teaching them how to handle it responsibly and successfully. Children learn from watching their parents and mimicking them, so if you don’t want your child to make the same mistakes as you did at their age, then be mindful of what you do around them and how they react to it. When they see that you’re spending too much money on unnecessary things or buying things that aren’t necessary at all, they will begin to emulate this behaviour as well.
- Show them that things cost money
The first step in teaching your child about money is to show them that money doesn’t grow on trees. If you don’t take this step, they may grow up thinking it’s a fairy tale or that it comes from the Tooth Fairy or Santa Claus.
You can teach them about the value of money by showing them that everything has a price. The more they see and understand the concept, the better they’ll be prepared to handle their own finances when they get older.
Take your kids shopping with you and let them pick out their own toys, books, or clothes — within reason, of course! This will help them understand how much things cost, which in turn will help them make smarter choices later on as they get older.
Explain to them how much it costs to live in our world every day (including groceries, transportation, rent/mortgage, and utilities).
- Give them commissions rather than allowances
Allowances are often given as a reward for doing chores or homework. They also help teach children about saving money and spending it wisely. But an allowance on top of what they earn through jobs can lead to overspending and bad financial habits. This is why it’s a great idea to give them a commission instead.
For example, if your child makes $10 per hour at her job, giving her $5 every week will not teach her how to manage her earnings effectively. Instead, give her $3 per hour she earns at work — this way she will learn that saving half of what she makes is important because it means more money in the long run if she wants to buy something expensive later on in life.
- Avoid impulse buys
Children learn by watching what you do, not by what you say or preach. If you go out and buy something on impulse, your kids will think it’s okay to do the same thing. Instead, teach them that impulse buying is a poor financial decision because they don’t know how much they really need or want it.
- Highlight the importance of giving
It’s important that kids learn that if they want something they will have to work hard for it. But at the same time, it’s equally important that they learn the value of giving back, too.
I’m not saying you should give your child a dollar every time he helps out around the house or makes his bed or does his homework instead. Make sure your child understands that doing good deeds is rewarding on its own merits. This can be done by tying together and helping others with acts of kindness such as volunteering or donating old clothes or toys to charity shops.
- Open a bank account
Children can start learning about money by opening a savings account at an early age. This is a good way for them to see how their hard-earned money grows over time and helps them develop good saving habits from an early age. You could also consider opening up a joint account with your child so they can learn how to use credit cards responsibly too.
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- Teach them to avoid debt.
Debt is a fact of life. There are many things you need to buy, and sometimes it makes sense to borrow money to pay for them. But teach your child that they should never go into debt just because they want something. If they really want something, they should save up and buy it with cash or wait until they have enough money saved up to pay for it outright.
- Help them to figure out the different ways of making money
Teach children of all ages about the different types of income. Talk about opportunities to earn a living. They could start a lemonade stand, babysit kids in the neighbourhood, or do chores like cutting grass and washing windows. Explain to them how people earn income in different ways. They could even get a part-time job after school!
- Give them a budget app
Kids love getting things they want, but it’s important to help them understand the difference between wants and needs–especially when it comes to clothes and gadgets. Helping them set up a personal budget will help them understand how much they can spend each month on their favourite things without going over budget.
It all boils down to instilling some basic money values and beliefs in children. Together with our families, we can change the face of money in society. There may be some bumps along the way, but if you take these ten steps, you’ll be well on your way towards changing your finances, improving your family’s financial future, and inculcating proper money values and beliefs in your children—and that’s a better future than any amount of money could buy.
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