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5 Healthy Money Tips To Teach Your Children
What is your relationship with money? Would you describe as healthy? Or is the topic of money a cause of stress and concern for you and your family?
There is a good chance that your views towards all things money related are a result of how your parents behaved towards it.
Read– The Total Money Makeover
Whether we realize it or not, how we were raised has a tremendous impact on how we make decisions as adults. Sometimes the results are positive, certainly. But other times the results are detrimental to our well-being, especially when it comes to our financial health. This doesn’t mean that we can just blame mom or dad (or both) for our money mistakes and leave it at that.
A lot of people need to Change The Code when it comes to how they think about money.
One of the biggest mistakes parents make when it comes to raising financially literate children is never actually teaching them about money. Amazingly this topic is off limits for some reason.
— Mark Lowe (@MarkKLowe) December 15, 2016
In turn children grow up overspending, not saving, and not investing or having any kind of financial plan.
Important Money Lessons To Teach Your Kids
As a parent you owe it to your children to teach them about money. If you do not feel educated enough maybe you can both talk to an investment specialist or even a debt counselor just to go over some of the basics.
Read– Rich Dad, Poor Dad
Children as young as three years old can grasp financial concepts like saving and spending. And a report by researchers at the University of Cambridge commissioned by the United Kingdom’s Money Advice Service revealed that kids’ money habits are formed by age 7.
1. Delayed Gratification.
You cannot just get what you want NOW. You have to save up for that item. A lot of the time if you wait to purchase something you realize that you may not really need that item anymore.
Have three jars labeled “Saving,” “Spending” or “Sharing.” When your child receives money, whether for doing chores or from a birthday, divide the money equally among the jars. Have him or her use the spending jar for smaller purchases, like candy or stickers. Money in the sharing jar can go to someone you know who needs it or be used to donate to a friend’s cause. The saving jar should be for more expensive items.
2. Money is finite.
It’s important to make wise choices, because once you spend the money you have, you don’t have more to spend. Ask questions like, “Is this something we really, really need?”
Give your child some money, like $5, and have him or her make choices about what fruit to buy, within the parameters of what you need, to give them the experience of making choices with money.
3. The incredible power of compound interest.
I am not sure if Einsten really said that but the truth is that compound interest is powerful and kids need to learn that and they need to start saving early.
Do compound interest calculations on Investor.gov. Here, they can see how much money they can earn if they invest a certain amount and it grows by a certain interest rate. And have them read this inspiring example of someone who used compound interest to his advantage incredibly well.
Read– The Wealthy Barber
You don’t need everything. Teach your child that you really only need shelter, food, clothing. Obviously it is okay to want other stuff but they should be assessing how important those items really are in the broader scheme of things. If they have saved for something and they do want it, fine. But teach them the difference.
5. How credit cards work.
This includes things like minimum payments and how long it would take to actually pay off a credit card balance if you only made the minimum payment. In short they should only ever use a credit card if they can pay off the balance in full every month. This goes for everyone.
Also teach them that credits cards are not for every day purchases. Maybe they are only for emergency situations or nowadays for booking hotels etc., or buying online.
These money tips to teach your children should be introduced at different ages. The key is to start young so that good financial habits can be adopted early on.
Money is a tool that can be used to live a happy and prosperous life. It can make our lives comfortable and enjoyable.
So sit down and come up with a plan to teach your kids some important lessons about money. Their future depends on it.
Like what you have read? Please share this post and please share your own money tips in the comments.
“Change The Code. Change Your Life.”