When you are a parent you always lead by example because chances are, everything you do, your child will imitate, and if you have a toddler, you know this to be very true indeed. This also includes your relationship with money, which needs to be examined. If you find that you are an overspender due to feelings of guilt brought on by the inability to spend as much time as you want with your children, the time to face your demons is now. You will then be able to teach better financial habits to the next generation.
The social pressures brought on my instant gratification and mimetic habits often add unwarranted stress on parents. If you are a new mother, you will automatically have to scale down on little things which have to make room for your child’s. The weekly hairdresser’s appointment might be replaced by the ballet, karate lessons, tutoring etc. And that’s fine, but it’s also fine to treat yourself once in a while. It’s all about balance.
When your child is old enough to understand how people use money to get what they need or want, give them an allowance. Allow your child to make their own spending choices when you decide on an allowance. Encourage them to make planned purchases as indicated by the weekly shopping list. Teach your children to save. Besides bank savings, a junior ISAs from Wealthify enables you to cash in on this tax-free saving. In turn, it enables you to put money aside that will come in handy when they want to make future purchases such as acquiring a car, going to university or even starting a business. We already have ISA’s for both the boys which we put into monthly, and will be giving this option to them in the future too once they have an allowance, or when they are paid for doing things around the home that is out of the norm.
You can start teaching about money and finance from a young age. Not only does it help them understand maths and counting, but also currency and how things are bought and paid for. Even something as simple as a money bank that they pop coins into is enough to start the money-awareness mindset. We then empty their pots every six months and count it with them before popping it into their savings accounts. As they get older, they can decide what they want to do with their cash.
When kids are old enough to understand, discuss the function and merits of a bank account with them and monitor the interest rates and savings. When they are older it is a good time to talk about investments and check out financial risks and different investment strategies that could potentially grow their money, but don’t skimp on educating them about the risks involved.
A vital point that you should not forget is to teach them about credit. They should not think that when there is no money that they could simply use credit. They need to understand the implication of a poor credit score, which not only leads to debt but also hinders them from getting a mortgage or study loan. Establishing a credit score is important and managing credit by paying off credit cards monthly is sound financial advice. This is something incredibly close to my heart especially as finance is just not talked about enough in schools.
As your children get older, you can allow them to borrow money from you in order to train their financial responsibility responsiveness.
Negotiate the repayment instalment that would be deducted from their weekly allowance and here is the catch, they need to pay back the interest too. Draw up a contract where repayments are set out along with penalties for a default payment. No bank or financial institution will feel sorry for you and that is something they must experience to make them credit wise. You can always put that interest into their savings fund without telling them if you feel guilty keeping the money for yourself.
Involve your child in financial planning for the household. Let them see how carefully you plan the budget, shopping , paying bills and plan holidays and major expenditures.
Seeing is believing and only you can prepare them for the pitfalls that come with financial responsibility.
How do you teach your children about finances and their money in the future?
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