While it’s a parent’s job to support and protect a child’s physical and emotional well being, it is also important to ensure your child has and will continue to have financial health. Budgeting, saving and rationing money are lessons that will come in handy throughout your child’s life.
As a parent, you must be sure your child is educated on these very important lessons — particularly when the average household has over $130,000 in total debt. Here are some tips to help you set your child up for financial success early.
Watch your words
It is important to carefully choose the words you use when you talk to you child about money, as they can have more of an impact in how they learn and feel about personal finance than you may know. For example, telling your child that something is too expensive implies a sense of lack — both a lack of power and a lack of control. Hence, negative emotions become associated with money, along with a feeling of helplessness.
Instead, empower your child by explaining that money can be controlled through good choices. Telling your child that you don’t feel something is a smart way to spend money on can be more powerful and positive.
Educating at home
With many schools shunning the idea of teaching personal finance to students, the responsibility lies solely with parents to teach kids the fine points of managing their financial lives. Start early by teaching your child to live within his or her financial means. For example, you may wish to set a monthly budget for your child that includes money for extras such as clothing and fun activities. Then, work with your child to divvy up the money according to priorities.
Encouraging your child to save his or her own allowance or money from a job to put toward long-term goals, such as summer camp or an expensive pair of sneakers, can help him or her better understand the concept of making a purchase.
You can open a savings account in your child’s name and teach him or her about online banking, or you can have him or her save money in a jar or box. This way your child can physically see his or her funds grow.
You may even embrace various tech gadgets to demonstrate to your child budgeting and saving. For example, smartphones such as the Samsung Galaxy S7 offers versatile and universal mobile pay options, such as Android Pay and Samsung Pay. These help your child get used to staying on top of paying for the items they want.
Make it fun
There are several games and apps that teach kids about money. A classic board game, Pay Day, makes learning about finances and money management interesting. This game teaches kids the fundamentals of adhering to a budget as well as concepts such as insurance and savings accounts.
Net Worth is a card game that is similar to Crazy Eights and has a goal of collecting financial assets and getting out of debt — two very real scenarios. The game encourages kids to overcome various financial obstacles, for example, being let go from a job.
With a little creativity and effort, you can teach your kids smart money habits when they're young that will help them make better financial decisions as adults. And that’s something that you can’t put a price on.