Considering the fact that financial literacy isn’t included in current school curricula, the responsibility of teaching kids about personal finance and money management rests solely on their parents and guardians.
Parenting is never easy, but with the right mindset, you can teach your kids to be financially competent as they grow older. This positive reinforcement will not only make them successful, but also train them to be good parents in the future.
Here are the most important money lessons you can teach your kids for them to be rich, not spoiled; responsible, and certainly not impulsive.
1. Money doesn’t grow on trees.
By the age of 3 to 5 years old, kids will have already formed a habit of demanding what they want. You may have already taken them to the ATM and they’ve seen you get money from it. What may come afterwards is your kid nagging to have you buy their favorite toy or food.
This is where your understanding and patience comes in. Let them know that you work hard for money and it doesn’t just come out of the ATM. Let them understand the cost of the things that they want and you can buy it as a form of reward or delayed gratification when you earn extra money.
2. Teach by example: Follow your budget.
Take your kid to go grocery shopping with you, or to run some errands. If they ever insist on making you buy what they want, let them understand that you’re following a tight budget and tell them the possible consequences of overspending.
This doesn’t mean that you’ll constantly refuse to give them what they want. Explain that there are times when it’s right to buy extra stuff when your budget allows it.
3. Trust your kids with money.
You can give your kid cash as an alternative to their lunch boxes. This way, you’ll be able to gauge their spending habits early on.
If they ran out of money for food on a new toy, then the opportunity to teach them the consequences of their spending will be remarkable. Kids learn more by experience.
There are some kids, however, who will deprive themselves of food to save up for something that they want. It’s all right if they’re not being too stingy on themselves. Encourage them to budget and save by keeping a piggy bank and ultimately, opening a starter savings account for them.
4. Teach the importance of delayed gratification.
Delayed gratification is the concept of resisting the temptation of an immediate, mildly pleasurable reward, in order to wait for something that is greatly pleasurable and much-deserved reward later.
Studies show that the ability to delay gratification can predict later success in life. This value also teaches your children that they deserve much better if they learn to practice patience.
This is important in raising them to be responsible, and not spoiled. Instill the concept “Good things come to those who wait” as a positive reinforcement to your child.
5. Spend quality time with them.
Never get too caught up with your career or business. They may end up loathing your ways to earn money, leading to the misconception that money makes a person self-absorbed and emotionally unavailable. A child that’s left feeling neglected will suffer from self-esteem issues, impeding them from becoming their best selves when they’re older.
6. Set up a dream board.
One way to encourage your kids to dream big, and eventually become successful is teaching them to set goals. A dream board is made up of pictures and words of encouragement that serves as a guide and motivation in achieving their goals. Short term goals can consist of your children getting good grades or getting better in their extra-curricular activities. Long term goals can consist of setting up a savings account if their piggy bank gets full, and which high school or University they can study when they’ve accomplished good grades.
7. Take them out of their comfort zone.
One of the worst things a parent or guardian can ever do to a child is to restrict or limit them to the comforts of their home and the usual environment they have in school. Your children need to see the world through your guidance.
Travel with them when they’re old enough and let them understand the new things they see. Take them to the market or grocery shopping and show them how you budget, and let them understand that they can’t always have what they want.
8. Teach by example: Encourage education and lifelong learning.
Encourage your kids to keep reading and learning, and be the best version of themselves. Rich and successful people have an insatiable thirst for learning and experiencing life, which makes them wise risk-takers in the long run.
Let them know that failures are nothing to be scared of and that it’s important in their journey towards pursuing their goals. Tell them to question everything they see and adapt an innovative mindset.
9. Break the common misconceptions about money.
Let them know that money is a commodity, and unlike most beliefs, you can find a way to make money work for you and not be a slave to it.
Teach them that financial success doesn’t give you the right to be arrogant, and to use money as a means of helping others that are in need. Generosity is one of the best virtues you can teach your kid alongside financial literacy.
10. Teach your kids about ownership.
In order to raise a financially successful individual, you have to teach them to take responsibility and ownership towards their actions and decisions.
Teach your kid not to fall victim to their wants and impulses. It’s always best to start them young. Set up a lemonade stand or garage sale during the summer and let them handle the business with you, so they understand the concept behind taking care of a business and earning profit.
It’s never too late to change your mindset and instill good values to your kids. Let your positive reinforcements be the solid foundation on which they can build their own life.