How to Teach Your Kids About Money Management
In order to grow financially responsible kids, you as a parent also need to be financially responsible. How can you expect your kids to become financially responsible when you are not financially responsible. Even if you have a lot of money, you should never let your kids that you have a lot of money, you should always show them financial scarcity. This does not mean you should deny your kids essentials and get them things that find happiness (a video game, for example), what I mean to say is that you need them to realize that it is really hard for you to make money so that the kid can have what they want. Unless kids realize that you need to work really hard to make money, they would never understand the true value of money. Kids need to realize the power of saving and the power of investment because only these two things can ensure financial security.
Warren Buffet is undoubtedly the best investor the world has seen. Warren Buffet is 91 years old and is still active in managing his portfolio. When Buffet was still at school, he was already earning more than his teacher. He sold chewing gum, and Coca-Cola bottles, delivered newspapers door to door, sold golf balls, and stamps, worked in his grandfather's grocery store, worked detailing cars, etc. When Buffet was 14, his parents took the kid to New York. They asked him what he liked to see in New York, the boy said “New York Stock Exchange!”
These days you don’t see any kids too serious about money, they spend money on unnecessary things, take everything for granted, and end up being broke all their life. If you want your kid to live financially free, you should teach your kids about money management.
Don’t provide everything they demand, even if you can. Let them realize that things cost money and money-making requires hard work.
Teach them how to save money. Kids get money every now and then from grandparents, uncles, relatives, etc. Give them a piggy bank and ask them to save money. Teach them why saving is important.
Help them make money. Ask them to help you in doing house chores for money. Tell them to start selling things that they don’t use through a yard sale.
The first step of growing your wealth is saving. However, saving should not be started in the later part of life (in your adulthood, or after you start earning), in fact, saving should be started when you are still a kid. You are no more a kid, perhaps, you never started saving money as a kid. Maybe your parents, elders, or even teachers never told you to save money. However, you as a parent can tell your kids to start saving money.
So, the question is how do you teach kids to save money?
Teach them the value of money. Will they believe you when you say money is valuable? Perhaps not. Ask your kids to work in the garden, clean the house, etc., and offer them payment. After they have earned the payment, take them to a river and throw the money they earned. They will become sad and will realize how important that money was.
Tell them to save money in a piggy bank. Why should they, they might ask. Tell them they can buy a smartwatch or a new video game with their own savings. Since it takes time to build savings, they will know how difficult it to build savings is. Therefore, after some time they will stop spending their savings.
Financial education is very important in our lives. When we are financially educated, we will have knowledge and skill in money management, when we can manage our money properly, we will have savings, we will have investment portfolios, and we will have assets. A lot of successful people we see in our society are the people who started early, they started working early, started saving money, and invested money. Therefore, you need to give financial education to your kids.
So, how do you give financial education to your kid?
Financial education includes a lot of topics, but the basic concepts are:
Spending money wisely
And investing money
You need to teach your kids, how important is money in life and how hard you need to work in order to make money.
You also need to teach money should be spent wisely because money does not come easily.
You must make your kids realize money should be saved because when money is saved, it can be used when you need it most. You can help them create a saving account and save money on saving accounts
You must also teach your kids to invest money, and teach them how money compounds when you invest. You can help them invest through micro-investment platforms.