Instilling good financial habits in children: Tips for parents and caregivers
Want your children to grow up with good financial habits? It’s never to early to start teaching them! Read on for five tips for parents and caregivers.
For your child to be best prepared for the future, you will have to teach them a broad array of life skills. And this includes how to handle money.
Thanks to technology, children have the opportunity to learn all aspects of financial literacy – they can even have their own debit card today! Using money wisely, with age-appropriate supervision, is the best way for your child to appreciate the value of money and start building healthy financial habits.
There are many versions of kids debit card free to choose from. But before applying for one for your child, you will have to explain to them two necessary things: what money is, and the difference between needs and wants.
The origin of money
The first thing children need to know is where the money comes from and how it is earned. Sometimes it can seem to children that their parents magically always have money! All they need to do is ask, and money appears for the things they want.
However, this is not reality; money is earned by hard work and it is not in infinite abundance. This is important for children to understand.
The difference between needs and desires
The second thing children need to learn is that there is a big difference between needs and wishes.
Needs refer to all those costs that parents have to pay for their family to have a normal and functional life. This includes paying bills, loans, grocery purchases, mortgages, clothes, shoes, and numerous unplanned expenses that arise throughout the month.
Children must understand that their parents can only fulfil their wishes – the things they would like to have, rather than need – on occasion. It’s fine to want things, but we need to learn that these are nice extras, not essentials we are entitled to.
So when we grow up, we don’t fritter away our income on ‘wishes’, and leave us unable to meet our financial obligations, and possibly in debt.
Five tips to help instil good financial habits in your children
So, once you have explained these two concepts to your child, how can you instil good financial habits in them? Here are five tips to help you.
1) Get them a credit card for kids
This model of learning financial literacy is one of the easiest for children and parents. In addition to teaching all aspects of finances from saving, spending, earning, investing, and donating money to the needy, it also teaches children how to fulfill their duties within the family.
Parenting experts usually recommend that children have activity charts that can be adapted to all ages, where parents post tasks from household chores and curricular and extracurricular activities. Children must complete the given tasks within the given time limit to earn extra money. And these can be linked to their card.
There are many options here, so you need to research which one works best for you and your children. The process of opening an account is simple and fast, and parents have complete control over their children’s accounts.
2) Encourage them to work part-time
If you want to teach children how to treat money, it is a good idea for them to find a part-time job once they are old enough As the money that parents give to children is not enough to cover all their expenses, they can look for additional work to pay for their ‘wishes’.
Teenagers can perform tasks such as babysitting, pet care, dog walking, gardening, tutoring, and working in a store or cafe. You’ll find that children will treat the money they earn from their own efforts differently to the money you give them.
3) Let them participate in the shopping
To best way to understand how the world of adults works is to encourage your children to participate in spending decisions as early as possible. And the easiest way to get start with this is grocery shopping.
Then they will be more aware of how quickly money is spent and how hard it is to earn. And sometimes they will decide not to buy sweets if they are the ones who have to pay money from their own pocket.
4) Encourage them to educate themselves
Just as an academic education is important, it is essential that your children are financially literate, so encourage them to be curious about money – how it’s made, how it’s spent and the consequences of wise and poor financial decisions.
The more your child knows about money, taxes, investments, loans, mortgages etc, the better equipped they will be to make wise choices when they are faced with big decisions as an adult.
5) Encourage them to invest
It’s never too early for children to start investing. Within the credit card model for kids, there is an option to invest in stocks and industries. Depending on which option you choose, you will have different investment options, with some you have over 200 companies, while with others there are around 100.
Children can invest small amounts of money in shares such as Apple, Google, or Netflix. In the beginning, until the children have mastered the subject, they can invest in a single branch of industry, and later they can expand their investment to various branches of industry.
The goal of this, in addition to enriching their portfolio, is that they do not depend only on one type or branch of industry, but invest money in various branches. Also, children can see the state of their invested shares in every occasion, whether they are increasing, decreasing, or stagnating.