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Raising kids to be clued up about money management is a challenging task. Unfortunately, most public schools do not teach about money management as it is not part of the school curriculum. This means that most kids grow up to become adults with a poor understanding of managing money.
In today’s world, so many people live beyond their means and rely on credit cards to fund their lifestyles. Therefore, it is no wonder parents need to ensure their kids learn the proper money habits right from when they are young.
So how can parents teach their kids about financial planning when financial literacy is not taught in schools?
We have listed eight practical lessons in money management that parents can teach their kids.
Introduce them to the value of money early on
Once kids learn that earning money requires a lot of effort, they might start understanding its value. For example, parents can reward their kids with cash for passing their exams at school. With money in their hand for trying hard and excelling at school, kids will start to understand that they need to work hard to earn money, and it is not something that can be obtained by simply doing nothing.
Encourage them to save
From a young age, parents can teach their kids to save money. For example, parents can get a piggy bank and ensure the child saves their birthday money instead of spending it all immediately. Furthermore, parents can teach their kids how the money has increased over time by having set days when they count the money together.
Parents can also say the following statements to their kids, and further help them to understand the importance of saving:
- ‘Saving money is important and also fun.’
- ‘Saving enough money will help me have a better tomorrow.’
- ‘Saving money is good for the future.’
Teach them about the world of investing
In addition to teaching kids about saving, it is also essential to teach them about investing. Parents can use many ways to teach their kids how to invest. For example, an investment app for kids could be a fun way of learning about the fundamentals of investing money.
Some investment education apps also have interactive games that can help keep the kids entertained whilst learning about investing fundamentals.
As kids get older, parents can also start to introduce the following concepts:
- The importance of stocks and bonds.
- How the stock market works.
- The various types of investments.
Encourage them to get a summer job
When kids get a summer job, it teaches them how to be responsible. With the extra money they earn, they can also learn how to manage it by making a budget for how much they want to save and spend. Having a summer job is one of the best ways kids can learn about financial planning.
Below are some practical ways parents can ensure their kids who have summer jobs are using their money to learn about money management:
- Parents can ensure that their kids who have a summer job have an allocated sum that they will contribute towards rent.
- Parents can also ensure that kids have an allocated sum they can save for trips and fun activities.
- Parents can also ensure the kids have an allocated sum for buying new games and things.
Once the kids learn to make their money stretch to do everything they want, it will ensure they know how to budget their money well.
Set savings goals with them
Being told to save money without a goal might seem pointless for any child. However, parents can make saving fun by setting savings goals. For example, when a child gets money for their birthday because they have a savings goal, they would not hesitate to put it in the savings piggy bank.
For example, a savings goal could be as simple as saving for a new video game worth $100 or even saving up for an Xbox or PlayStation worth a few hundred dollars. Having a tangible saving goal that the child is enthusiastic about will encourage them to want to save more.
Open them a custodial account
Custodial accounts can be set up by parents or guardians who want to save money for their children. Sometimes grandparents may also open a custodial account for their grandchild. The money saved into the account is seen as gift money and is therefore tax-free.
Some of the benefits of opening a custodial account include the following:
- It is flexible – you can save as much or as little as possible.
- There are no penalties for an early withdrawal.
- It is easy and cheap to set up.
- Anyone can top up the account, including friends, grandparents, etc.
- Hand it over to the child when they grow up.
A custodial account is a fantastic way to build a nest egg for children to prepare for significant life events such as weddings, college, or even buying a house.
Offer them the opportunity to earn through chores
Kids should know that doing the house chores does not need to be dull. When they can earn money by doing house chores, it will teach them the value of hard work. It is also a win-win because the kids will learn the importance of cleaning the house.
Parents can also assign more money for tasks that take longer to complete. For example, if vacuuming the whole house takes much longer than other chores, it might be worth paying 10 dollars instead of 5 dollars to complete it.
Continuously encourage them to stay interested
Learning about money management should be a fun experience for kids. It should encourage them to make good choices when it comes to money. For example, a child who has been taught to save money will want to keep their gift money instead of spending it all.
In closing, kids need to understand the practicalities of financial planning. Then, these children will grow up into adults who are well-equipped to manage their finances and stay out of lousy money practices.
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