Children learn from the people around them as well as their environment. While subjects such as math and science are usually taught in school, many kids learn about money through observation. As such, parents need to lay a great foundation for their kids to handle their own finances in the future. Here are a few life-changing money lessons for kids that can put them on the road to financial freedom and prosperity.
How to earn money
One of the best money lessons for kids is to simply teach them how to earn money in different ways. As much as kids may receive money through birthday cards or as allowances, it is important to teach them that they have to work to earn money. This will help to prepare them for the workforce and the associated financial responsibilities. One of the ways of instilling this concept is by getting them to perform odd jobs to earn some money.
Budgeting
If kids are to grow up with solid money skills, they should start by learning how to budget. Help your children to understand their income and expenses as well as live within their means. Apart from gathering experience on making choices for spending, they should also practice delayed gratification. Teach the young ones not to spend as soon as they get money and to keep track of expenditure.
Having a Wish List
Since kids are used to asking for everything they want, it is hard for them to set priorities. This is why it would be important to sit down with them and make a wish list together. Once you have a list of what the child wants to do with their money, help them rank the items based on what is important.
Saving and Investing
Setting aside some money for the future will help to set your kids up for financial success. Have your kids set aside a portion of the money they get for their short-term and long-term goals. Also, teach them to make the most of savings by putting money in investment vehicles that earn them interest.
Setting Specific Money Goals
To succeed financially, one should have clear and specific financial goals. Get your kids to define the kind of items they want to acquire, how much they will cost, and the period within which they want to raise the money. This will help them make better financial decisions and avoid unnecessary debt.
The Different Forms of Money
For most children, it is easy to associate the idea of money with physical cash and coins. However, parents should also teach their kids that money can exist digitally in a bank account or card. This will make it easy for them to manage their non-cash money and balance their accounts.
The Real Cost of Credit
Besides money management skills, kids should also learn about the real cost of credit early on. This may include lessons on the differences between buying with credit and buying with cash. Children should also be made to understand that borrowing will mostly attract interest.
All Debt is Not Bad Debt
One of the most important money lessons for kids is that sometimes it is necessary to take on debt. However, the borrowed funds must be used prudently, paid off in time, and should be within a reasonable limit. Kids should also know when and why to take on debt.
Money Is Not Everything
As much as money is important, it is not everything. Kids should not be obsessed with money, developing a desire to earn and accumulate more of it. It is necessary to teach them that money is a small part of the equation and that family, friends, and living a full life are also important.
Sharing and Giving
When teaching money lessons for kids, it is important to incorporate a sense of sharing and giving. Children should always be taught and encouraged to develop a habit of generosity and giving. From an early age, try to speak to your child about the importance of sharing their time and money with the less fortunate.
In conclusion, be sure to start teaching your children these money lessons early enough. When you start early, you will have much less work by the time they hit their mid-teens.