- November 24, 2016
- Posted by: MoneyJunction
- Category: Children, Education, Investment, Savings
As parents, we constantly complain that our children have little idea about money. But although we may frequently lecture our kids on this subject, very few of us have ever actually sat down and explained how finances work.
Start with a simple money box (even three and four year olds can understand this). Encourage your children to save at least some of any money they receive in their money box. And make sure they realise it’s their money. You may think you’re being responsible by whisking off the full money box to deposit into your child’s bank account, but he won’t see it the same way. Young children have no concept of the future. If they don’t see a tangible result (such as a toy or something else they want), then they won’t see any point in saving.
As your child gets older, let him open his own bank account and increase his responsibilities. Perhaps you can give him a monthly sum and make him responsible for buying his own clothes. There is, of course, the chance he will blow all his money in one go, but then he will have to deal with the consequences. You’re not going to simply hand over another lump sum until the following month. It’s also important to help children set their own financial goals. If they can see the benefit of saving, as children, then they will have a lifetime financial advantage.
It’s also a good idea to encourage a spirit of entrepreneurship. Think for a moment how you felt when you got your first salary. What a boost to your self-esteem! We need to give our children the opportunity to experience this same feeling for themselves – and the sooner the better. Encourage your children to think up ways to earn extra money themselves. It could be babysitting, gardening, repairing computers or even making handmade jewellery to sell at the local craft market. Help them to set goals, plan their strategies and set up their own business plan. This will be of huge benefit to them in the future. The job market is incredibly volatile and even a university degree doesn’t guarantee one a job these days. Entrepreneurial skills will give children the confidence and the ability to make their own career choices.
As parents, we need to take the time to explain finances to our children. Especially when it comes to the money we’re investing for their future. If you’re investing in unit trusts, for instance, explain which companies you’re investing in and why. If you have an endowment policy, explain what it involves. The more our children have a concept of why we’re saving and what it means, the less chance there is that one day they’ll squander it all on a wild spending spree. And by teaching them the basic principles of finance, we’ll be giving them the freedom to lead financially responsible and secure lives.