Teaching your children good money management skills from an early age will help to provide them with a massive head start in life and stop bad financial habits from forming.
Here are some great tips for bringing your kids up to be money-wise:
Make Learning Fun & Practical
Money matters can be very dull and boring, especially to children, so try to make your teachings as fun and practical as possible, by linking them to something that your children will find relevant or rewarding.
Instead of just dishing out pocket money, identify ways for your children to earn it by doing jobs around the house and help them to run a mini-budget, so that they can save up and buy the latest toy that they really want. Involve yourself in their financial decisions in an advisory capacity and help them to feel responsible for what they spend.
When making household financial decisions, get your children involved, so that they can begin to understand the value of money and the necessary trade-offs between must-haves and nice-to-haves. Show them your own household budget (Download our free budget template) so that they can appreciate that there are limits on what can be spent.
Introduce the Concepts of Saving, Debt and Compound Interest
Encourage your children to invest some of their pocket money into their Child Trust Fund (relevant to children born in the UK in recent years) or a similar type of savings account. Explain to them how regular contributions will provide them with a pot of money that they can use to help buy a house, go travelling or go to university when they are older.
If you can afford it, try to provide additional encouragement by matching the amount your child contributes to their trust fund each year – in the same way that many companies match employee pension contributions.
Talk to them about debt and how easy it is for people to build up heavy debts and potentially ruin their lives. Explain how they can keep themselves out of debt by working hard and watching what they spend.
Also explain the concept of compound interest and how it can be your friend or foe depending on whether you are saving or whether you are in debt.
Starting a Pension Fund
A while ago a columnist from one of the large financial websites wrote how he had set up pension funds for his children when they were born. Considering most people do not even think about pensions till their late 20s, these children will have already benefitted from 25 years plus worth of compound interest before many of their peers will have even started their pension and will have grown up thinking that pensions and saving are the norm.
Role Models
Provide your children with good financial role models – the best role models being yourselves – their parents. If you are unable to exercise good money management skills, how do you think your children will learn?
In addition to this there may be other family members or people in the media that you can point out to your children as good money savers and money makers.
Child Tycoons
One of the key traits of today’s super-rich entrepreneurs is that many of them ran mini-businesses as youngsters. So as your kids get older, you should encourage and support them to earn more pocket money with entrepreneurial activities such as car cleaning or gardening mini-businesses that they can run during weekends and holidays.
You don’t need to stop at traditional pocket-money businesses either, maybe your talented youngster has a flair for IT and you can help them set up a website or a blog to make money from, using programs such as Google Adsense or Amazon Associates.
Next Generation of Money-Savvy, Money Saving, Money Makers
Taking the time to teach your children good money skills will help ensure they do not grow up to be a debt-burdened spendaholics, but instead become financially savvy money savers and money makers.
To ensure you can share great money management skills with your children, keep reading through the pages of moneysavingchallenge.com, starting with the Wealth Creation Pyramid.
I am very really agreed for this subject because Kids should learn the right way to control their budget since they were young.