Smart.Happy.Money 7: 3 Ways to Teach Your Kids About Money
Thank God, the kids have gone back to school. School holidays can be hard, maybe both parents work, maybe you’re a single parent or as in my case, one works, one studies.
The big question.... What to do with the kids?
It's also a very expensive time of year. Most activities cost money, money that you normally wouldn't have to spend. I try to keep our extra holiday spend to a minimum while still having a good time. It had me thinking about how kids view money. Kids are not born understanding money. It is something that they learn, school teaches them a little bit, but not much. Most of what kids learn comes from you, the parent.
And that brings me to today's blog topic
3 ways to teach your kids about money.
1: Be open and honest.
Teach your kids about the family finances. The amount of information you give them will change as they get older, but you can start young. Tell the 5-year-old that you aren't buying the toy they want because you need the money for food or to save for a beach holiday. As they get older, let them know how much you earn, teach them that it is private and you are trusting them with the information. Explain to them mistakes you have made, the huge credit card or personal loan for example. The more open and honest you are with your kids about the family finances, the more they will learn from you that money isn't free and needs to be managed.
2: Teach them how to use credit
This is especially important through the teenage years. Although you can begin much earlier. Tell your kids that if you buy this $200 item on credit it could actually cost upwards of $400 by the time you pay it back, ask them 'does that makes sense'?
Too many young people get their first job and first credit card or loan to go with it. Remember that by paying minimum payments a $5000 credit card debt takes around 33 years to pay back.
Introduce your teens to the idea of good and bad credit. Good credit is for things that make you money like investments, bad credit is for things that lose their value. Think cars and boats.
Show them how to use credit by setting an example. Don't rely on a credit card as your emergency fund. Show them how to save instead. They will learn by watching you.
3: Teach them to be grateful.
Just by winning the lottery of being born in Australia you and your kids are amongst the richest people in the world. People that manage money well, do so with the knowledge that they are lucky to have what they do.
We live in a world of instant gratification and seem to be losing the feeling of gratefulness that comes from saving for an important purchase. Teach kids to be grateful for what they have, not to always be wanting more.
Showing your kids that part of managing money the right way means using your money to help others will teach them valuable lessons that will last a lifetime. Involve them in charity donations, even donating their old stuff to an op shop so that other kids will get the chance to enjoy it teaches a great lesson. Be thankful for what you have and help those who have less.
By being a positive role model for your children, they will learn to manage and respect money. It will help to set them up for a secure future. Do you have any other ideas about how to teach kids about money? If so, let me know at firstname.lastname@example.org.
Have a great day.
Ben Graham-Nellor is an advisor, coach, blogger and speaker who has worked in the financial services industry for over 15 years.
BGN Financial Management Pty Ltd is a Corporate Authorised Representative 468796 of Professional Investment Services Pty Ltd AFSL 234951 ABN 11 074 608 558 www.centrepointalliance.com.au
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