I think we can all agree that we want our kids to be money savvy. But this is easier said than done.
Two steps I’ve taken with Nicky is to have a chore chart where money is deducted e.g. when he leaves things at school or leaves his shoes around. He also has his own bank account where he is saving money and the other day he used it to buy his own Wimpy Kid book!
Nicky was also given three containers to spend, save or give, and I think this is also a healthy attitude as to what to do with your money.
But how do you teach them to save money in the first place? Guest writer Frankie Wallace has some ideas.
Whether you’re a single mom trying to establish your own financial independence or you and your partner are both contributing to the household income, one of the best things you can do for your children now is to teach them to become financially dependent for the future.
It might be hard to think about your child’s financial independence when they’re in diapers, or if they’ve just started their first year of school. But, as they get older and start to understand the concept of money, there are things you can teach them that will encourage them to have a healthy relationship with their finances forever.
Children who don’t learn to become financially independent may have a hard time finding a steady job and could become the next “boomerang generation” – moving back in with their parents. It’s estimated that 31% of South Africans between the ages of 15-24 aren’t working, training, or studying.
You don’t want your children to become a part of that statistic.
So, what can you do to teach them financial independence?
Start the Conversation Now
It’s never too early to talk to your kids about money and how to manage it effectively. But, if your child is a teenager or already thinking about higher education, now is a crucial time to discuss loans, debt, and financial management. Most teens who are preparing for university are thinking about things like res living and how to sign up for classes. Make sure they’re prepared for the financial aspect of college life, too – including taking out loans. Student loans can impact credit scores based on factors like
- Debt-to-income ratio
- Payment history
- Credit age
- Credit mix
While going to college or pursuing higher education isn’t a bad thing, it’s important to talk to your child about how to handle loans and what they can do to get out of debt as quickly as possible. If they want to buy a car or home after graduating from a university, their credit score will play a part. Paying off loans is one of the best ways to improve that score, so reiterate the importance of making payments on time and not taking out more loans than necessary.
Encourage an Income
One of the best ways to teach your children about money management is to encourage them to get a job. Having a summer job is often a right of passage for teenagers. It’s exciting for them to make their own money for the first time, and with few responsibilities, it’s easy for them to spend every paycheck right away.
You can help them learn how to save by introducing some financial responsibilities into their lives. That might include making them pay for their own gas or insurance on their vehicle. When they know they have a monthly bill coming, they’ll have to plan and prepare, rather than blowing every penny on clothes and food. It’s a small step in the right direction that will make it easier for them to learn how to budget as an adult.
Some of the best flexible summer jobs for teens include
- Tutoring
- Dog-walking
- Babysitting or house-sitting
- Delivery jobs
- Online jobs
Talk to your teen about their interests and the kind of income they want to make, and you can help them find the first job that will start them on a path of financial responsibility.
Set a Positive Financial Example
Your kids look to you for everything. Even when it seems like they aren’t listening or paying attention, they’re taking note of your actions and behaviours more than you might think.
That includes your financial habits.
Thankfully, you can use your own financial decisions as teachable moments for your kids. When you’re putting part of your paycheck into a savings account, for example, explain to your children why you’re doing it and make them more personal. For example, you could tell them you’re putting money in that account to save up for a family vacation, or to eventually retire so you can spend more time with them.
Putting a tangible idea on your saving and spending habits will make things easier for your kids to understand. They’ll be more likely to mimic those behaviours, not only because they look up to you because they’ll recognize that saving their money can eventually lead to greater rewards. Consider opening up a separate savings account for your children, so they can make decisions on when they want to save or spend any money they receive.
Whether your kids are ready to head off into the world on their own or they’re still too young for a job, there are lessons you can teach them about becoming financially independent. Don’t be afraid to talk about money matters in your home. The more comfortable your children are with financial communication, the better their relationship with money will be.
[…] of ways that money can quickly start to drain away. You also need to set an example for them to teach them to be financially independent. Finally, it’s important to remember that retirement is still a long way off, and new parents need […]