It’s never too early to learn about the basics of money management. The lessons you teach your children while they are young will serve them (hopefully) well as adults. Here are some great lessons you can teach your kids, according to ‘Get a Financial Life’ author Beth Kobliner.
Waiting to buy something you want
Delayed gratification can be a hard lesson to teach young children, as they don’t really have much of a concept of time. If they want something, they usually want it now. However, it is an important lesson to learn.
You can start with something as simple as shopping. Before you go into the shop, set ground rules that you’re not buying anything for them this time. This will help them understand that they can’t get something every time you go into the store.
Help your child save for items, rather than just buying them whatever they want when they see it. Make a game of how much they need to save; visual cues can help your child learn. For example, if they need $5, draw a ‘growth’ chart that the child can colour in each time they get money. Once they have coloured into the $5 line, they know they have earned the item they desire. Alternatively, check out the Rooster Money APP for easy tracking on your smartphone.
Making choices about what to spend your money on
As adults, we know that sometimes money doesn’t stretch as far as we need it to. Teaching your children at a young age that money is not never-ending will help them to prioritise their spending – and hopefully make good financial choices when they are older.
One of Kobliner’s key tips is to give your child some money and let them make the choice of what to buy with it. For example, you might ask them to choose between a book or a toy. Let them know they can’t have both at the same time and empower them to choose which item they want the most.
“The sooner parents start taking advantage of everyday teachable money moments, the better off our kids will be” says Kobliner.
The benefits of compounding interest
Set up a regular savings payment for your children – even if it is only small. At the end of each month, talk to your child about how much interest they have earned on their savings for that month.
Then help them do some calculations. For example, if you have $10 saved, and earned 50c interest, ask them how much interest they think they will earn next month when they have $20 saved.
Showing them how they can earn ‘interest on interest’ can help your children understand why saving as early as possible will reap dividends later on life.
Paying off the credit card each month
It may seem simple, but talking to your kids about debt, and in particular, how credit cards work, could save them a lot of money and financial stress in the future.
Hand-in-hand with this, is talking about budgeting. Show your kids how to budget – one day, this will help them living costs, without relying on the credit card to meet usual living costs. If they are relying on the credit card, there might be something amiss in their budget – and it may just be that they have taken on too much debt.
Help your children have good money stories, by talking to them about these tips – like compounding interest, the earlier you start, the better the results can be. And as always, please keep us in mind for any of your personal lending needs; our team at Motor Vehicle Finance look forward to helping you and your family find the right personal loan for your situation.