As parents, we want what’s best for our children. We want to lay a solid foundation so they can have a safe, secure and successful future. Teaching your children valuable life lessons, such as how to manage money responsibly, is an important step toward that secure future.
Money plays a critical role in our day-to-day lives; how we live, where we live, what we eat, education, healthcare, entertainment – just about every decision in our life involves money. However, that doesn’t make talking about it very easy and it’s an even bigger challenge when you have to talk with your children.
There’s no other better teacher than you as a parent to teach your children how to be financially responsible from a young age. A 2020 survey published by US-based company, Quicken, the maker of money-management software and provider of online services, revealed that people who learned about money as a child were three times as likely to have a personal annual income of US$75k or higher than those who didn’t learn about money in their formative years.
The survey interviewed more than 2,000 adults, and it also noted that about a third of the respondents said nobody taught them about money when they were children.
Let’s face it, your children are going to learn lessons about money from somewhere – whether it is television, social media or friends. Shouldn’t such an important lesson come from you?
Whether they are five or 15, it is never too late to talk with our children about money to help build their financial confidence and responsibility and empower them to participate in their own financial security.
Fortunately there are simple steps we can take, and places we can go to get the right information we need.
For some it might be tougher than talking about the “birds and bees”. Helping your children understand the value and uses of money takes much of the anxiety out of the issue. You will know when that time is right and there are online tools available to parents to guide you through this conversation. Republic’s wealth management site has easy to understand information on investing and investment products that can help.
Most parents give their children an allowance. Some receive a small stipend when they are still in single figures to pay for snacks in the school cafeteria or to put in their “piggy bank”. Others receive a weekly allowance to pay for transportation to and from school or to purchase school meals.
Why not attach the allowance to chores around the home? Small rewards for keeping a tidy room and cleaning up after dinner can help children understand the relationship between work and compensation. They learn to place value to their efforts and the efforts of others. It’s also an early introduction to the compensation and performance structures they will meet when they enter the world of work.
You may not necessarily want to incentivise academic performance but for a child who has struggled in a particular subject and has made significant improvement, a financial reward may well be warranted.
Creator of The Money Mammals and author of The Art of Allowance, John Lanza, recommend that new parents start early to teach their children about saving and spending so that they are well-prepared and can avoid financial mistakes at the stages in life when it matters most.
While the little ones might be raking it in, discourage the spending sprees at the school cafeteria or the shop on the corner. Spending a few dollars a week on a candied treat is one thing, but your child does not need ten dollars’ worth of bubble-gum, even if its sugar-free, watermelon! And remember to positively reinforce good spending habits.
When they’re old enough take your children to the bank so you can open a savings account like RightStart or RS Teen, or give them the certificate as a birthday or holiday present. Explain the banking system to them and ask your banker to describe the work they do. Make visits to deposit savings and maybe even set an annual savings goal.
As they grow older, you can slowly introduce investments into their financial vocabulary, so by the time they’re old enough to work, they’ll know the difference between TISP and RUSFIS. As they say, the earlier they understand investing, the better off they’ll be in the long-run.
Your children know you’re not “made of money”, but it’s important to not give in to every request from your children. Wants versus needs is a good place to start in helping them understand why they’re not getting a pony for Christmas. A puppy, maybe!
Include them when you go to the supermarket and retail stores and show them the price of items. This also helps them to put a value to the things they want and appreciate the things they already have.
Encourage that entrepreneurial spirit in your children, especially when you see the spark. You may have a budding chef, a tradesperson or marketing wizz, in the family whose talents and skills might grow into something bigger. Support their interests and guide them through the business side of things. Whether it leads to a career or helps to pay for their education, these are valuable life lessons for any child.
If we’re saving to renovate the bedrooms, can we afford to buy a new car? There comes a time, and you’ll know when it’s appropriate, that you can include you children in big family decisions so they learn how to compromise, negotiate, assess situations and discern needs from wants.
Overall, teaching your children to be financially responsible at an early age can be simple and fun. You don’t have to be a Certified Financial Planner and it sets them up for stability and success as adults.
We want the best for our children; we want for them the life we never had. To a large extent that means providing for them financially well into their adult life. While it is important for us as parents to give our children that financial security, it is equally important that we teach them to be financially responsible themselves. As the proverb says “give a man a fish and feed him for a day; teach a man to fish and feed him for a lifetime.”