Instilling financial responsibility in kids
Today’s post is a guest blog post written by Rachel Everly. She loves to write on finance and education with topics towards student welfare making students self-reliant.
Raising kids right is a huge responsibility and requires a lot of time and effort if you want a well-rounded child. Most parents in our circle take care of all the basic training that their child may require, such as teaching them good behavior and manners, sending them to school to gain education, helping them acquire hobbies, allowing them to pursue their interests, and so on. Together, all these trainings develop the child into an accomplished person.
One thing though that many parents fail to look into is the fact that children need to be taught about finances as well and this is, in fact, a very important responsibility that needs to be fulfilled, yet is ignored. Parents are plain reluctant to talk to their children about money. A survey relates that they are more willing to talk with their children regarding issues such as dating, sex, drugs and alcohol than money. And why is that? Because parents either do not realize the importance of instilling good financial sense in their kids, or they feel that they are not qualified enough for it. Some even think that the school will provide them with the necessary financial education. While some schools (mind you, not all) do give their students some basic lessons regarding money topics, the lessons are exactly that: basic. It is your responsibility to impart money management information to your kids so they become financially independent.
Children are continuously observing you; far more than you think. And it is your behavior that they learn from and adopt so it is up to you to act responsibly if you want your children’s learning process to be enhanced. If you involve them in your financial decisions they will understand how money is managed. For instance you are planning to make a big purchase – of a lounger or even a car – and before actually buying it obviously you would list down all your options, see whether it is coming under your set budget, and if not how you can adjust accordingly. When you will involve your children in this process they will see how you developed a budget and compared the various alternatives available to you as per your allocated budget. They will understand how to make responsible financial decisions.
Learning from mistakes
Yes, you should guide your children regarding their financial behavior but don’t interfere in every financial decision or purchase they make. Let them be independent. Give them suggestions but do not stop them from making wrong decisions (obviously only as long as they are not causing them harm). Let them learn from mistakes. When they will make mistakes they will try to understand what they did wrong that led to the unwanted consequences and how they can avoid it later on. They will make sure not to travel on that path again. And that lesson would be better than what you could have given them verbally.
Allow your children to be involved with your smaller financial matters. If there is a problem you are facing regarding finances discuss it with them. Obviously it is not a good idea to worry them for no reason about something that cannot be solved or controlled, but the lighter matters can be discussed and it is surprising how cooperative and supportive children can prove to be.
Importance of saving and planning
Make your children aware of terms like “family budget”, “allowance”, “expenses”, and “savings”. Show them what the difference is between their wants and needs. Using examples would allow you to make the lesson better and comprehensive. This really helps with understanding the value of saving and planning. Give them suggestions on how they can use their monthly allowance. Tell them that saving a certain percentage of their money will allow them to accumulate enough to be able to purchase that bike they have been wanting. They could use the rest of the allowance on whatever they want. This would instill in them the value of saving.
The habit of saving proves to be extremely useful when it is time for your child to attend college as that is an extremely expensive period of one’s life. The rising cost of higher education ensures that students take loans for their program and sometimes even for living expenses. This tends to really burden them later on after graduation. By teaching your children about saving you are really doing them a favor and they would be grateful to you when they would manage to minimize their debt by saving during college.
Money is not everything
Although teaching your kids the value of money is important make sure that they do not consider it above everything. While it is important to have money to be able to support yourself there is something beyond that as well. You do not work just for money but also so that you are able to contribute something on your part. Similarly, children should be made to realize that the odd home chores you are sometimes paying them for are not only for money but also because they need to help around and contribute to the family. It is not just about money.
Encouraging children to consider their options, is a great way to help them make decisions and take responsibilities. Having a good grasp on your finances does not only ensure that your money is being managed properly but also that you are not violating your spending limits. Instil in them a sense of delayed gratification and how they can experience that once they start saving up for a certain something they really want. Tell them that they should be prepared for the unexpected – such as a flat tire or sudden need for a visit to the dentist – and whether an emergency fund could help them out in such cases. Explain to them the importance of saving up for retirement early on. All these lessons would mature your child regarding finances and their positive decisions later on in life will reflect this.
Thanks Rachel for this great post with some excellent pointers. Definitely need to keep these in mind as Baby T grows up and we teach him about money and personal finance.
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