6 ways to raise financially intelligent children
What kind of financial news do you pay attention to? CNBC, Fox Business Network, or do you get your financial dose from reading the Wall Street Journal?
Parenting is something that an individual acquires over a period of time. Developing a good sense of financial security for yourself and your family is an integral part of long-term planning.
As a parent, you would certainly want your children to have a good financial shape through their lives. Moreover, the foundation of their education in managing money should be persistent. According to a theory by Piaget, the development of the mind is the most active when we are children. The ability to develop habits and absorb information occurs at that age. If we want to raise the next generation of money savvy children, starting early is where the treasure is hidden.
In 2018, a study was conducted based on money management and how children acquire financial education and money management traits. The outcome of the study expressed that 94% of students acquire financial information from their parents, 62% of these students absorb this information from a teacher while 21% of them take a course to learn more. This clearly expresses the fact that parents have the biggest responsibility of educating their children and influencing their financial habits, which include money management, saving and investing.
For kids, the concept might be a bit difficult to absorb. We aren’t talking about the technicalities here, but we need to constantly keep this topic in conversation in front of them. They learn the most from their surroundings and of course, from the habits of their parents itself. Once they have learned how to mimic these habits, they will be well on their way to learn more advanced concepts such as budgeting and investing.
Start talking!Starting early and discussing money management concepts with your kids is important if you want them to attain these important skills and attain good financial habits. These skills are necessary to enjoy a rewarding and prosperous life not only for yourself, but the future generations as well. Your financial conversations matter, your children will thank you.
SpendingFor most children, spending is probably one of the most fun aspects of learning about money. If you help your children become better savers, you might be able to instill some valuable lessons within them about how personal choices relate with managing money. Advising them about the consequences associated with their spendings is another great lesson to be discussed with them. If their choices are demanding inappropriately high spendings, then it is important to monitor and make them practically aware of the consequences so they can experience it first hand. When they do, they will be more cautious – this solely depends on their age, maturity and their ability to grasp things.
Encouraging a child to become a good saver can be quite a task, but it is nothing impossible. Any child can become a good saver. A technique that is proven and definite is to open a savings account for your children. Once this has been established, you can review the monthly savings with your children and how the account seems to be growing. When the children see this in practicality, it will urge them to include savings as a definite habit. 73% of parents mention that their children are learning how to save through a savings account.
GivingChildren growing up to be responsible members of the community is the wish of every parent. To get them started on the path of giving, they need to be taught that they have to give a portion of their money to those who don’t have it. This can be done by insisting that they give a share of their savings to a charitable organisation or religious institution – it should be deemed as compulsory. This will get them into the habit of sharing their wealth with others in the long-run as they will continually be great givers in their generation. As they grow up, they will become more aware of which organisations they want to support.
BorrowingYou might want to help your child in terms of borrowing money, merely due to the fact that you want to introduce the concept of loan. The purpose of the loan should be considered and then, the concept of paying off the borrowed money in regular intervals should be discussed. Even if they’re borrowing money from just you, make a deal with them. Far too many people get into trouble for taking on unrealistic loans and fall into serious debt. Establishing a repayment schedule for them will provide them with a basic understanding of the rules that are attached with taking a loan, similar to a bank. By teaching children to repay their loans as promised, you will be saving them from future trouble.InvestingSince the concept of investing is more complex than those of spending and saving, this will be more attractive to tweens and teens. Getting them started with small shares will help them understand this concept in a better way. Just explaining the concept won’t fulfill anything within them because they will only come up with more questions and become more confused as time goes by. Actual actions will help them understand and become more informed about the different types of investments they should make. Once again, starting early is important but also for kids, starting small. Allowing them to monitor the investments you might be making, or even letting them make an investment of their own can give them hands-on experience. They can start by reading about business, reading the finance section in the newspaper, browsing a few finance blogs or youtube channels for video content. We live in a world where everything is so accessible, yet we continue to lack in terms of letting our children attain financial education.We might not know it, but these things can become habitual once they are taught from an early age. It is important to have this dialogue with children so that they don’t grow up to be clueless, and end up bearing with a lot of loss since they never know what to do in financial situations. Nurturing these values and lessons into children will urge them to naturally become the most financially intelligent individuals of their time, and will also be able to help others to do the same.
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