Whether we like it or not, money plays a big part in our lives. While most people think financial wealth requires a lot of good luck, the reality is it’s all about the skills you have and how you use them. If you teach your children how to take care of themselves, why not teach them how to manage their finances as well? You might be thinking it’s too early to face them with the harshness of the real world. However, the sooner they learn, the better off they will be as adults, experts say. So, how exactly do you teach your kids to budget money effectively?
Set a Good Example
Children are like little sponges. As a parent, you’ve probably heard this worn-out phrase one too many times. Nevertheless, there is a reason why this cliche is so popular. You can teach your kids valuable lessons about money, yet if you don’t practice what you preach, your efforts will be futile. Setting a good example is one of the most powerful choices you can make when trying to teach your kids to budget money.
If you are struggling with some poor budgeting decisions you made in the past, use them as a teaching opportunity for your kids. Seeing their parents get back on track will make children less likely to repeat the same mistakes and may actually be better than always having done it perfectly. Make sure to be more mindful about your spendings and build a relationship with money that you would want your kids to have. Remember, a child’s ability to observe and understand what is going on around them is much more powerful than you think.
Don’t Dumb Things Down
Many parents think saying money doesn’t grow on trees is a good way to teach kids about money. So, what do you do when your little one says that money does grow on trees because it’s made of paper?
Denying kids the opportunity to understand how things work is something you should always avoid when teaching them a lesson. Instead, explain how difficult it can be to earn money. Take your time with these meaningful conversations and arm yourself with a lot of patience. Try to answer any questions your child might have. Simplify but never dumb down. Your children will be more likely to make sound financial decisions if they understand the reasoning behind them.
Teach Your Kids to Budget Money by Including Them in Family Budgeting Talks
When big family decisions are being made, most people tend to exclude their children from the conversation. If you’re trying to teach your kids to budget money effectively, this can do more harm than good.
Let’s take moving abroad as an example. For parents, relocating the whole family to another country is a stressful task. There are many things to take care of, from packing to adjusting to a new life. It’s understandable if you’re not in the mood for a lot of explaining during this time. However, remember that including your child in the conversation will not only ease the transition but help them understand the bigger picture when it comes to finances as well. Practical examples will solidify the foundations of children’s understanding of money better than anything else.
Give Them Something to Work With
You wouldn’t teach your kid to ride a bike without giving them a bicycle, so you shouldn’t teach them about finances without giving them some money either. Whether you want to pay them for their good grades or their chores, helping them understand that money needs to be earned will be one of the most valuable lessons you can teach them. The earlier your kids learn they have to work for what they want, the better they will be at accepting the struggles of adulthood.
It would be a good idea to get your child a jar or a piggy bank where they can collect their earnings. For older kids, consider opening a savings account. Once they see their money accumulate, they will understand the importance of hard work and saving. The pride of achieving something on their own will act as a lifelong reminder of their abilities and perseverance.
Teach Your Kids the Difference Between ‘Need’ and ‘Want’
Once your kids earn their first buck, it won’t be long until they find something to spend it on. Because of this, it is crucial to teach your children the difference between needs and wants right away. In most cases, young people would rather spend their money on something they think is fun or cool, rather than something boring like groceries or rent. Although it might seem a bit harsh at first, including your kids in the family budget will help them understand that necessities are always a bigger priority than desires. So, next time your kid needs new shoes, have them use their money to buy them. Doing this will instigate your child to be more mindful about their spendings and more creative about their savings. However, don’t forget to allow them to enjoy their money from time to time. Kids need to be prepared for the future, but they need to enjoy their childhood as well.
Allow Mistakes
There will come a time when your child will have enough of their own money, and they will want to spend it on something useless. Contrary to popular belief, it’s not always best to stop them. Sometimes, the best teaching moment is the one where your kid realizes on their own that their money was not well-spent. This shouldn’t be an opportunity to nag or pull the good old “I told you so”. Rather try to help them understand their mistake and encourage them to make smarter decisions in the future.
Deciding to teach your kids to budget money effectively is a challenging task. You won’t always be there to supervise their finances. Nonetheless, by providing them the knowledge and understanding of how money works, you will ensure they are one step closer to avoiding reckless financial setbacks as grown-ups.
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