Financial independence is something everyone strives towards, but it all starts with foundation phase financial literacy. Exposing kids to money matters from a young age will make them comfortable with the intricacies of finances and help them gain confidence as they enter the world on their own. Here are three invaluable tips to help your kids on their way to financial literacy and being able to manage a budget.
Involve them in Household Finances
In times gone by kids were supposed to be seen and not heard and discussing finances in front of them was completely taboo. Kids should be involved in more aspects of household finances to help them learn the value of a dollar.
Showing them how to set up a budget for groceries and plan for utility bills will show them what it takes to keep a household running. Let them keep tabs on the grocery bill while shopping or let them calculate which products will give you better value for money.
There is a fine line between involving the kids and guilt-tripping them though. This is not the place to show them that they are a financial burden on the household but rather to educate them on how working for money contributes to a certain quality of life.
You can also involve them in big household purchases to see how you might need to save to buy something big or think long and hard before making a big investment.
Play Games
Playing board games is probably the easiest way to introduce kids to various concepts of money. There are tons of games that involve trade, bartering, and buying and selling where kids can learn how money is used.
The classic Monopoly board game teaches tons of valuable lessons like investing in property, counting money, collecting rent, and even paying to get out of jail! The latter hopefully being an unnecessary skill.
The Game of Life is another game where kids need to learn about budgeting and preparing for the future and they are also exposed to real-life bumps in the road that could cost them valuable resources if they are ill-prepared. Nothing is more boring than learning about debt and taxes but if you can cleverly disguise it as a game, you can tempt even the most resistant children into learning a thing or two about money.
Pay an Allowance
If you want to teach your child how to make smart purchasing choices, there are few things as helpful as paying an allowance. This will make kids think more than once before making impulsive decisions as they now use their own money to make a purchase.
Letting kids buy small things like candy or a toy is much less risky than having them make ill-informed decisions on their own later in life.
There are no hard and fast rules about how much allowance to give but it is important to remember that this will need to be added to your monthly household budget. Here are some pointers to make it easier for them to manage their budget:
- Some parents choose to let kids buy all their own clothing, toiletries, and entertainment luxuries while others choose to keep the allowance small and only hold kids responsible for their own frivolous purchases.
- The allowance can also be tied to household chores where kids are paid for small tasks like doing the dishes or taking out the trash. Earning money for doing work lets them understand that money quite literally doesn’t grow on trees.
- They will quickly start to second guess any purchases, associating their spending habits with less desirable chores that need to be done.
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