Because so many people wish they’d known sooner about how to better manage their money, it’s a good idea for parents to be proactive when it comes to instilling good spending and saving habits in their kids. Even a child as young as four or six can make personal finance skills part of his or her daily life. Use these tips to start your kids off on the right foot as they make their way down the road of money matters.
The Concept of Delayed Gratification
One thing kids have the most trouble with is patience; when they want something, they want it now. No matter if it’s something that costs time or money, parents can explain to their child the importance of waiting and biding their time to reap greater rewards later. For instance, if your child wants to go to the toy store today, you can explain to her or him that waiting until he or she earns a trip to the toy store with good behavior or good grades will give a sense of pride and accomplishment for hard work. When children are older, they’re sure to take this lesson to heart and save their money rather than spend it on something frivolous.
Rewarding Hard Work
Rather than give your kids whatever they desire whenever they desire it, show them that they have to work to earn rewards. For instance, if they want to go outside to play, have some ice cream or watch television, have them complete a chore beforehand. This instills in them that they have to earn rewards and that they’ll be rewarded for their hard work. Giving your children the opportunity to earn their satisfaction also helps break the knee-jerk reaction to ask for something before completing a task that shows they’ve earned it.
Just like it’s important to shop around when searching for a local insurance agency that offers the best policies, kids need to learn the importance of shopping around for products and services of the best quality. This lesson can be learned by allowing your kids to spend their allowance on whatever they wish, no matter the quality or brand name of the item (within reason). If the child buys an item of poor quality simply because it’s the most affordable and that item breaks in a short amount of time, it teaches them that sometimes it’s best to wait and save up to buy items of superior quality and ones that last for years to come.
Debt management is most certainly a money lesson that’s best learned as soon as possible. For your kids, you can teach them this lesson by giving them three options if they want to buy something: buying it at that moment, saving up and buying it later or borrowing money from mom and dad. Kids who choose to borrow from mom and dad should have to agree to specific repayment conditions and pay interest as well. Owing mom and dad a few cents or dollars in interest is better than owing a credit card company a few hundred or thousands of dollars.
Not only are the above lessons good for kids, they can make for a good refresher for parents as well. Look for ways to teach your kids how to stay on top of their money now to strengthen their future personal finance skills.