There are some things that only a parent can teach their child and the right attitude towards money is one of them. Though you don’t have to be a spendthrift or a mathematical genius to do well with money, you do need to know the basics of money management including how to live within your means.
Now, you might be thinking that you aren’t really the best person to teach your child about money because you have had trouble in that area yourself. But actually, no matter whether you are in talks with a chapter 7 bankruptcy lawyer or showering in bank notes, you can always teach something – even if it is what not to do!
Living Within Your Means
One of the hardest lessons we all have to learn is how to live within our means. This lesson is especially hard when you are living on a low income but it is just as important no matter how much money you have.
As an adult, living within your means can be quite complicated as you need to use monthly payments to figure out how to pay for costs that could be weekly, monthly, yearly or one-offs. Luckily, these skills are quite easy to teach early on using pocket money.
By giving your kids a monthly income, you will give them the freedom to choose how to spend their money. When they inevitably run out or don’t have enough for a particular purchase, they will have to learn to wait for their next installment. This is a fast way to learn the power of saving up!
The Value of Money
Kids often don’t really understand the concept of money because they don’t have to work for it in the same way adults do. Teaching the value of money is a really important step to make and kids around 5 or 6 will likely be able to understand the concepts you want to impart.
As a working parent, telling your child about how you earn your money is a good place to start. It’s likely that they already know that you have to go to work so you are just building on their knowledge here. Telling them how you spend your money (in basic terms) is also a good idea. Follow this up by giving your child opportunities to increase their allowance by doing odd jobs around the house.
Working Towards Savings Goals
Learning how to be patient is not something most children take to naturally. Though deferring a reward can be satisfying, many children struggle with this concept without your guidance. Helping your child to set a savings goal and then incentivizing them to see it through is probably the best way to introduce this new idea.
Once they have seen the power of saving, you should then encourage them to set aside a certain amount of money each month to create the kid equivalent of an emergency fund. This will hopefully help them to see that by saving a little bit regularly can make a big difference so when that awesome new toy appears, they won’t have to wait as long to save up.