Many parents have debated with regards to what the best gifts to give their children over time would be. While aspects such as a good education, books, educational games, toys and puzzles and a stable home environment are all crucial, one of the most important gifts of all that is often overlooked is that of a good financial education.
Children who don’t learn about using finances correctly and investing a portion of their earnings often end up becoming adults who generate excessive levels of consumer debt because of living beyond their means. In many cases, they may even rely on their parents for financial support well into adulthood as well.
Below are a few ways in which you can start preparing your children to learn as much as they can about making their money work for them at the earliest possible age.
Introducing Basic Money Concepts
Many children will be able to understand the simpler aspects regarding money from around the ages of three to four years old. As such, you can start off by talking about money whenever it’s relevant to your daily life. For instance, if you’re out shopping with your child, show them how you’re comparing prices and looking for items that are on sale so that you can save money.
Allow them to observe while you’re paying bills and explain to them how much essentials like heat, electricity, groceries, rent or mortgage payments and clothing costs. If you’re paying down debt, explain to them why you have it and how long it will take for you to repay it in full. If your children are slightly older, they will be able to understand the concept of how interest works on debt as well.
Moving on to Investing
Although teaching children to pay bills on time is crucial, it’s just as important for them to know how they can make their money work for them over the long term by investing a portion of any funds they may receive as gifts, allowances, or even from working at a part-time job when they’re older.
- Start small. Show your child how investing works by having them save a portion of their money so they can watch it grow over time. Allowing them to learn this way while they’re young will help prevent them from making costly investment mistakes when they’re older
- Let your kids invest in something that matters to them. This will help them become more interested in how their money can grow over time
- Have investing become a new family habit. Whenever your child receives money from an allowance, additional chores or even as gifts from friends and family, have them invest a portion of it as quickly as possible. Over time, saving and investing a portion of whatever income they receive will become second nature – which will pave the way for good financial decisions to be made throughout their lives
Teaching your children to be financially savvy from as early an age as possible will help prevent them from making the same money mistakes you may have made in your early adult years. If you would like to give your kids a head start by having them learn about investing and you’re unsure of how to go about it, contact us today.Continue reading