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10 Tips To Raise A Financially Savvy Child

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A significant majority of parents and guardians can attest to just how daunting raising a responsible child can be.

Caregivers should go at all lengths to impart essential life lessons that will be beneficial to their future lives. Sadly, financial matters are often overlooked.

Parenting can be compared to a continuous balancing act. You want to offer your kids stability and structure while ensuring you don’t go overboard in your discipline methods. While still young, developing minds also need to be financially savvy in every aspect of their lives.

They often learn through observing and repeating a single action until it becomes part of their day-to-day mannerism; like a habit of sorts.

Take the time to turn random activities topics into engaging financial lessons. If you don’t do it as early as now, they may probably never learn how to manage every penny that lands on their palms.

As Margaret Goldman put it, “Children become irresponsible only when we fail to give them opportunities to take on responsibility.”

For that reason, we’ve compiled a detailed list of the most useful tips to bring up a generation of financially savvy individuals:

1. Don’t Wait Until They’re Older

Most parents avoid discussing with their kids the subject of money for one reason or another. A majority of them are intimidated at how complex it may be, while others don’t know where to begin.

Before you think twice about whether to do away with the lessons, have their future in mind. A majority of adults who were never taught a thing about finances struggle to work their way out of different financial situations.

Of course, you can’t expect a kindergartener to instantly wrap their minds around ‘grown-up’ financial issues. You need to form the basis of your lessons at a certain age and progress as your children get older.

The right age to start having healthy financial conversations with your children would probably be between the ages of five and eight. Be intentional when educating your children on basic money habits.

Whenever they have a birthday coming up, that’s the best time to instill in them the value of planning. Your kids should give priority to what matters most and save for stuff they hope to get in the future.

Every age in your child’s life should be coupled with a new money lesson.  For instance, you could use age five to introduce the basics of planning. Teach your way up to age 16 where you focus on taxes, employer benefits, and paying for college.

The beauty of teaching kids while they’re young is that they won’t forget easily – depending on the company they keep.

2. Let them Know How to Earn their Own Money

A basic personal finance lesson to teach your kids is that money doesn’t grow on trees. Sheltering your little ones from the harsh financial realities will do them no good. A majority of today’s parents were brought up with strict financial restrictions.

Rather than pass it on to their kids, they deliberately neglect it and spoil their kids with highly unnecessary stuff in the form of toys, expensive holidays, gadgets, etc.

Have your kids ever asked you anything about your paycheck? No? How uncomfortable would you be sharing such information with them?

Contrary to what most parents think, sharing details about your earnings isn’t taboo – nor has it ever been.

If anything, being candid about how much you earn and how you spend it is the best way to put your point across. Your kids should know what their parents do all day.

From there, they’ll easily piece together that without those financial obligations, they’d have no food on the table or toys to play with. Additionally, they’ll feel inspired to find their own ways to make their own money.

Most workplaces have a Bring Your Child to Work Day. The aim of this is to give kids a glimpse of what their folks do to make money.

If there’s no special day like that in your workplace, take your children out on brief excursions and explain to them the nature of your job.

Kids are naturally energetic: help them put that energy into good use by creating a kid-friendly list of chores.

Reward them for their hard work by setting a wage for each completed work. Teach your older kids to invoice you the moment you receive your paycheck.

3. Teach them to Avoid Impulse Buys

Impulse buying is a complicated lesson for everyone – kids and adults alike. As mind-boggling as it may be, make it your responsibility to help your kids understand the distinction between a want and a need.

Put it this way: a want is that which we can do without, while a need is imperatively necessary for survival.

Retailers know that impulse buying is the number one threat to any neatly constructed budget. That’s why you find lots of stuff that you don’t necessarily need packed in their dozens on checkout counters. Most, if not all, kids fall prey to this marketing strategy.

Teaching your child about impulse buying is most effective when it’s done practically. A strategy you can try out is to take them to a store loaded with tons of impulse purchases. Give them at most $5 and leave them in charge of that amount.

If they don’t spend the entire amount during their time at the store, let them keep the balance. What they decide to do with it entirely up to them. If they don’t have a savings account, touch on how important it is and why they should have it.

Be sure to emphasize that turning down the opportunity to satisfy their juvenile longings can be of benefit to them in the long run. There’s a two-fold lesson on this strategy. Also, taking your child to the store shouldn’t be an everyday thing.

Spare some time once a week or once every fourteen days to educate your young one to steer clear from impulse buying. Visiting stores also provide the perfect platform to bond with your child.

4. Help them to Start Saving Money

Saving money serves as the basis of wealth-building and financial security. Some of us have learned the essence of saving via trial and error while most discovered it through experience.

In school, kids aren’t taught anything about saving or a constant source of financial security. This applies to most homes as well.

Understand that those little ones you love so dearly will one day have kids of their own. There are lots of ways to empower them financially, but the major one has to be the lesson about saving.

Since it’s an in-depth topic, you have to start small and use the right strategies. For example, you could start with giving them a piggy bank that appeals to their interests in terms of color, cartoon characters, and so on.

Put in a few dollars or coins and explain that the piggy bank is for saving. They should also know that the money they save will be of use to them in the future.

Say, for instance, they want to buy a new action figure or the latest barbie house doll collection. Rather than give them the money, encourage them to save up for it.

Alternatively, if you provide your children with an allowance of five dollars every week, give them one-dollar bills instead.

To encourage short-term saving goals, post a picture of the snack or toy on the piggy bank. This will also act as a visual reminder of their reason for saving. If you save money, you act as a perfect example that they can imitate.

5. Develop a Spending Plan for Your Kids

If you have kids between four and twelve years, they’ve most likely begun deciding how to spend their allowances.

Teenagers, in particular, need guidance on how to develop spending plans to manage large amounts for the long term.

If you never learned how to budget as a child, it may be difficult to impart the necessary budgeting skills to your kids.

Helping your child to come up with a budget is a straightforward endeavor. If you know how to draft a budget, teaching your child won’t be as hard.

Start by offering monthly allocations to your kids if you don’t already do so. Allowances help in making your kids recognize the essence of having a long-term plan for every dollar they get.

If they splurge a month’s worth of allowance on the first weekend, they may learn delayed gratification in the next. You should be consistent on your end when it comes to paying them their monthly allowances.

If they use up the entire allowance the second week or anytime in the future, refuse to bail them out. Instead, teach them to plan for their money and, if need be, supplement their allowance by taking a job.

If your child has a couple of goals they’d like to achieve in the future, the spending plan should give them a guideline on how to use their money wisely.

Also, encourage them to open a savings account for a start. The account will help them to pay themselves while still being able to be consistent in their savings.

6. Let Them Have Their Own Junior Bank Account

Speaking of savings, children as young as five years can benefit a great deal from having their personalized junior banking account.

Practice does make perfect as far as money management is concerned. Teaching your kids the value of money can be achieved quicker by helping them open their own junior accounts.

Children need to learn the banking language. Based on their age, use practical teaching aids to help them understand better.

The various banking terminologies – deposit, withdrawal, compound interest, etc. – may seem daunting to put across, especially to relatively young minds.

However, if you do it early enough, they’ll know how to define most terms and how they apply to various banking situations.

The typical age to start giving your kids pocket money is when they’re six and a half years. As a parent, be caring enough to guide them on opening a bank account. Also, emphasize that having a junior account is a great way to manage their dollars and cents.

In Australia, kids who start receiving pocket money are impressively active in their savings. Approximately half the young population deposits cash into their accounts each week. Make your kids’ experience more relatable by letting them tag along on your next visit to the bank.

Every time you withdraw or deposit money into your account, your kids should be there to see it. That experience alone will give them a practical insight into the banking process, as opposed to the prevalent electronic process.

When it comes to owning debit cards, it’s not such a bad thing as long as you’re involved in all their purchases and online transactions.

7. Help them Set Short-Term/Long-Term Financial Goals

Every parent has a pivotal role to play in their kids’ lives. The best way to help them in getting ahead in life is by teaching them the value of having goals in life.

To accomplish any of their goals, they should be willing to work hard and save big. An example of a short-term goal is attending an upcoming event or buying an expensive toy. Most parents would rather splurge on anything and everything their kids ask for.

Be different and take that opportunity to teach them about doing what it takes to achieve their goals. In other words, let them put in the hard work to get what they want.

Give the young ones age-appropriate activities that they can use to raise money for whatever they’re working towards.

Older kids can scavenge online for legit job opportunities or accomplish minor tasks like babysitting and get paid for them.

Instilling the value of financial independence in kids will motivate them to be creative in their approach to achieving their goals. However, that doesn’t mean that you should neglect your parental obligations.

Assist them in more significant issues, but be careful not to shift their focus away from reaching what they set out to do.

Each time they accomplish a goal, don’t let it go unnoticed. Celebrate your kids by rewarding them with something they’re passionate about.

Next, help them in setting lasting plans that will benefit them for years to come. These are otherwise known as long-term goals. It’s worth noting that any financial you help them set should be age-appropriate.

8. Use Technology to Broaden Your Money Lessons

Who said teaching financial literacy has to be a tedious endeavor? We’re aware of the numerous positive effects of pc-related gadgets in promoting educative content via fun games and apps. Most schools today make use of tablets during lessons.

When using technology, it’s never too early neither is it too late to start educating your kids on financial matters. Anything you teach them now will impact the decisions they make in regards to their finances.

You can make the educational process extra fun with the use of different tablet and smartphone apps. The following are a couple of the best child-friendly money apps for both Android and iOS devices you can use:

  • Savings Spree (7yrs+)
  • Renegade buggies 6yrs+)
  • Bankaroo (7yrs+)
  • Celebrity Calamity (7yrs+)
  • GreenStreets: Unleash the Loot! (5-8yrs)
  • PiggyBot (6yrs+)
  • Star Banks Adventure (7yrs+)

Kids thrive in fun atmospheres. Extend the same to all your money lessons and your little ones are bound to be extra attentive. The apps mentioned above are living proof that you only need to approach the topic of finances from a different angle.

Certain apps help both parents and children. Kidibank, for instance, helps you in allocating your kids’ allowance. It also supports your children in keeping track of their earnings complete with their personalized emoji character.

Regardless of your strong stance on technology, you can’t deny how well kids respond to certain games and apps.

Rather than rule them out completely, use it as a tool to demystify money-related issues like investing, saving, income, earning.

9. Don’t Stop them from Spending

Letting your kids learn about money requires them to actually spend it rather than hear about it. Kids see their parents spending money or swiping their cards all the time. If you think that they learn enough by watching you do it, it’s time you reconsidered your methods.

When your kids watch you paying for stuff at the counter, it doesn’t offer them the same financial hands-on experience.

Most finance experts advocate letting your child be responsible for their own expenses like clothing or school lunches.

In any case, they won’t be kids for the rest of their lives. When you let them buy their own stuff, you essentially place them in that much-desired position of making their own decisions. While they’re still young, they should make their own mistakes and learn from them.

When you give them that privilege when they’re older, the stakes are bound to be much higher. When they misuse the money you give them, it won’t be long before they realize the value of a dollar and never take anything for granted.

When you buy something worth $50 bucks and it breaks, you can always return it and get a refund. They can’t. Whenever they spend their $5 on something low-quality, take that opportunity to educate them on delayed gratification and quality.

Wouldn’t you rather you have a conversation on $5 rather than $5,000? Considering they’re kids, expect to have this same discussion a few times over before they finally get the point.

10. Teach Them to Give (to a Good Cause)

It’s one thing to teach your kids about generosity, and it’s another to show it through your actions. If you’ve made it a habit to make financial donations, let your children notice your efforts and imitate them.

Giving to the needy or the less fortunate is one of the most important money lessons you can ever teach your children.

If you look at it from a practical point of view, being charitable is the perfect means for kids to get a grasp of basics such as saving and budgeting. There are three primary types of giving every child should be aware of:

Family Investments

This is a general category that covers all financial decisions made by you for the benefit of the entire family. Point in case, different parents may adjust their financial plans for the sake of enrolling a child in music or sports lessons.

Helping the Needy

This kind of charity is achieved by handing out donations, gifting or participating in acts of kindness for the less fortunate. Cooking for the homeless, handing out clothes or shoes or setting aside cash for charity are just a few examples.

Donating to Charity

This involves saving up for and buying monetary gifts or cash donations to charitable or religious organizations.

A practical way to teach your children about charity is to buy them three plastic jars. Label the first jar ‘Savings’, the second ‘Spending’ and the third ‘Charity’.

The moment a percentage of the money your child gets is specially dedicated to giving, that’s when a budget gets a sense of purpose. Lessons in charity also pave the path for a healthier, happier future.

Generosity lessons aren’t only meant to shape your child’s finances, but various facets of their health and well-being.

Different Kids, Different Responses

As you may already expect, not all children will respond the same way to any of the ten tips provided above. Also, as they grow older, you may notice several differences in how your kids spend their money from the same money lessons.

If you do it right, they’ll stay within the system no matter the various money-related circumstances that come their way.

Once they leave your house and start a new life of their own, they’ll be well-equipped with the right stuff courtesy of you and your spouse.

Developing interactive financial lessons for your little ones can go a long way in instilling proper financial habits.

Starting that kind of beneficial education from a fairly younger age is key. Also, try as much as you possibly can to lead by example.

If you don’t practice any of the points on this post you should still be keen on instilling good financial values to your kids.

As you teach your kids on basic money lessons, set a good example to help them see the role model in you.

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