How To Raise Financially Responsible Children
Times are tough and financial responsibility is stressful for people at the moment. Did you know that your kids can pick up on this emotion and feel disempowered? By discussing and teaching financial acumen in their formative years, you can help to improve their self-esteem and social awareness.
It’s in these years that attitudes towards money take root, setting the foundation for financial responsibility in later life. As parents, we play a critical role in teaching our children about money management. But how do we do it effectively? The answer lies in making financial education an integral part of their childhood education.
Start Early
Teaching children about financial responsibility is a crucial aspect of their development. By instilling healthy money habits from an early age, we empower them to make wise financial choices as they grow older. Why not begin by introducing the basics of money and transactions? Teach children that money doesn’t simply appear—it’s earned through hard work. Whether it’s completing household chores or achieving good grades, children should understand the real value of time and hard work.
Instil A Savings Habit
In a world that is more and more focused on instant gratification, children need to learn to value the habit of saving their money. Explain to them that they don’t always need the newest technology, toys or clothing and that sometimes they must make do with what they have.
You can teach them about the savings process by helping them save for something they want—a toy, a game, an outing or anything else that they really want. This can be an invaluable lesson in delayed gratification, a key component of financial responsibility.
Introduce Budgeting
As your children grow older, introduce them to the concept of budgeting, where income is allocated to different categories like saving, spending and giving. Help them understand the difference between what they want and what they need and encourage them to prioritise their needs over their wants. In doing so, you’ll be teaching them a critical life skill that even many adults struggle with.
Financial Planning
Once they’ve grasped budgeting, it’s time to delve into the more advanced aspects of personal finance. That includes investments, insurance and taxes. Educate your children about the benefits of saving and investing and discuss different savings accounts, long-term investments and the power of compound interest.
Show your child that savings can grow through investments and explain why insurance is essential for risk management. While these concepts might seem daunting, it’s important you introduce these concepts early. Remember, the goal isn’t to turn your child into a financial whizz overnight but to gradually expose them to these ideas over time.
Lead By Example
Children learn best by observing their parents’ behaviours and actions. By modelling responsible financial habits, you can significantly impact your child’s understanding of money. Engage in open conversations about money matters. Explain how you budget, save and make financial decisions as a family. Encourage questions and ensure your child feels comfortable discussing money-related topics. Explain to children that while money is important, it isn’t everything. Teach them about generosity, empathy and the importance of giving back to society.
Need Help With Your Finances?
If you want to empower your children to make smart decisions in the future, make sure you first have your own finances in order. One of the best ways to do that is by hiring an experienced accountant. At The Garis Group, we help our clients with matters of tax, Self-Managed Super Funds (SMSF) and property investment strategies. We can also refer you to our referral partners Politis Investment Strategies for Financial Planning services. Book a consultation today to learn more.
