In schools around the world, the importance of imparting essential financial tips is ignored such that it is only given lip service, with only mathematics teaching simple and compound interest in which kids have to solve certain sums that may or may not be helpful in their future.
Parents are often dependent on educational institutions to teach their children about finance. However, it is important that the parents ensure that their child does not repeat any financial mistakes they would have made. Imparting financial knowledge is essential as the child will be able to calculate finances required for important decisions in their life. Following are a few ways in which you can make sure that your children make better decisions when it comes to handling their money.
Delaying gratification from age 5
According to a research, a child’s approach towards finance is shaped at the age of 7 on an average. This means that he or she has the ability to grasp its concepts from as early an age as say 4 or 5. Therefore, they must be taught at this juncture that they can’t be stubborn to get what they want and that they would need to wait and save money to buy it. If they are troublesome, distracting them is a way to make them have patience without them knowing it. There could also be jars created as well for them, such as for “Saving,” “Spending,” and “Sharing.” These jars are the basics of segregating one’s money even in adulthood. You should know how to spend your money, save it, as well as share or donate it to those in need. This creates value towards money early on in childhood.
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Encouraging them to making their own choices
Gradually, the next move is to make the child realize that they have to live within their means. The money they already have is what matters and if they spend all of it, then it would spell trouble as they would have nothing left. To inculcate this, they need to be given the freedom to make some financial decisions on their own while being accountable for it. For example, if you are going to a grocery store, the child could be given $5 to spend, buying what they wish to. They must then be involved in the decision making process of buying not just for themselves, but for the home as well. Reasoning will make them think and help them become practical when it comes to buying. Treating them like a grown up in this aspect will set them for a great financial future.
Motivating them to decide for their future
When the child becomes 15, the family sits together to talk about what college he or she should go to. It is important for the parents to make them realize the gravity of this decision by letting them take a sensible call on what will be their future.
With tools such as College Scorecards, kids can learn how to compare college costs, student loans to be paid, and so on. Parents need to be upfront about their financial status as well, in a matter that the child will start thinking of ways to earn a few bucks on their own while pursuing higher education. This means that the children need to work hard in their lives, something which can never be let go whether money exists or not.
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