Becoming a parent is a lot of responsibility. It requires heightened levels of patience, reservation, and commitment. Children are impressionable and what they learn in early years develops behaviors and traits that will carry on into adulthood. While doing everything you can so that your children are happy and healthy are at the forefront of parenthood, eventually they’ll be on their own. When that time comes, you’ll want to make sure that they understand how to be financially responsible. This will allow them to avoid debt and the stress that comes with living paycheck to paycheck. If you’re not sure how to achieve this, here are some tips on how to raise financially responsible children.
It’s never too early to start discussing money with your children. There are plenty of educational resources that are age appropriate for young kids. For example, there are educational videos and resources called The Money Mammals, books with children dealing with money, and books that parents can read to better understand how to communicate about finances and their importance from an early age. You’d be surprised how quickly children will begin to understand money and finances. While it might not seem like something you want to share, try to be open regarding the family finances. It’s important for your children to understand what can and cannot be afforded, especially when it comes to buying things or experiences. This is especially important with teenagers regarding college. If you won’t have the finances to put your child through school, they should know as soon as possible so they can start saving and working on obtaining scholarships. Consider teaching them about investment planning during uncertain economic times to help prepare them for the unexpected.
Teach the Value of $1
Young children are surprisingly good at grasping the concept of money. To help instill good budgeting behaviors from early on, give your child an allowance—even if it’s as small as $1 or $2 per week. This allows them to better understand how much things actually cost and helps to teach patience. If your child wants to purchase something that’s $10 but they only have $6, they’ll understand that they need to save their money and wait a few weeks before they’ll be able to afford it. This helps to instill the true value of $1, which will create financial responsibility in adulthood. If your child has money they want to spend, try to give them different options on what they can buy. By showing them that they could either buy one item that costs $6 or multiple items that add up to $6, they’ll get a better understanding of reward while feeling empowered and independent. This can also help them carry financial decision making into their futures when they need to decide between two purchases or determine wants vs. needs.
Open a Savings Account
Opening a savings account early can help your child understand the value of working towards a goal and creating an emergency fund. Before you do this, however, try to explain the banking system to them a little bit. Describe the differences in accounts, what the employees do, and what happens to your money when you deposit it. After answering any questions, take them to a bank and open a savings account in their name. Depending on your financial situation, consider matching every dollar they put into their account to help them grow their savings. If you do this, just make sure that you explain why you’re doing it and how you’re able to help.
Running a lemonade stand is not only a fun weekend activity, but also a great opportunity to teach about financial responsibility. If your child wants to sell lemonade or crafts, encourage them to do so. While there are plenty of different options to go about doing this in a digital world, having them set up a good old-fashioned stand will show them that time is money. Creating strong work ethics in your children is a great way to raise successful adults that are driven, ambitious, and financially responsible. Entrepreneur opportunities are also a good way to introduce supply and demand and integrate your children into the world of business. When handled correctly, it’s also a great moment to teach about negotiation and compromise.
Dip in the Stock Market
While the stock market can be mildly confusing, try to introduce them to the most basic concept. When you start to understand it, investing in things you enjoy can actually be pretty fun. Choose a stock like Disney or Netflix to invest in and show them what happens to their “share” when things in the stock market change. There are plenty of apps that allow for easy management and it can be a great teaching opportunity. Over time, it can also be quite profitable.
Teach Your Children About Bills
Unfortunately, it’s rare for schools to teach children about taxes, bills, and other important financial responsibilities that adults have. Help them get started on the right foot by teaching your children about bills from an early age. Let them sit down with you while you pay some of the basic utility bills. Explain that for your children to have access to their favorite shows or movies, you need to pay a monthly subscription, WiFi, or cable bill. Using smaller examples that they can relate to—like Disney+ or Netflix—can help them better relate to the process.
Teaching your children financial responsibility early will help them understand how to create a stable future with a diverse investment portfolio. Working with a financial advisor will help you and your children reduce financial risk and gradually build wealth throughout your lives. To learn more about how a financial advisor can help improve your financial responsibility, contact William Bevins today at [email protected] or by calling (615) 469-7348.