Full Guide to Managing Family Finances – Chapter 8
Learn how to give your child a healthy attitude to money that will empower them to stretch out their pocket money and later their income by prioritising what is important and understanding that money alone does not bring happiness.
Competing financially with their peers Financial competition is one aspect about handling money that is quite difficult to teach to children. Especially if you are constantly comparing your lifestyle to that of others who are better off. Children will soon pick up on conversations about better cars or bigger houses so try not to constantly compare your lifestyle with others. If you do, the message you will be sending your children is that only a lot of wealth or conspicuous spending can make you a success in life. If this lesson becomes ingrained into their minds children will start comparing their own possessions against the material objects of others. This can lead to a loss of self worth when the other child has more expensive trainers or the latest smart phone.
It is a great idea to encourage healthy competition but try to keep this to sport or other activities that are not connected with money. The best motive a child can receive is to compete against themselves. Inspiring a child to do better because it will empower them is the best motivational tool you can use. Try to make them understand that money is a means to an end and not the end itself. If you can instil the message that money does not bring happiness you will be giving your children the most valuable lesson in life.
Being a Good Role Model Above all it is important to be the role model from which your child can learn about good monetary habits. If you don’t have good financial habits yourself you will not get your children to understand how important it is to save or to pay bills on time. Even young children can be taught the importance of prioritising money to pay for rent or household bills and you can always make a game of finding the best bargains when you go shopping. Children love to please their parents so why not involve them in the weekly shopping trip? This will also teach them about impulse purchases and why it is important to buy the essentials first before moving on to treats. Explaining about the value for money concept to children can include a talk about how durable a product is and that it may be wiser to save up for a better quality product than to choose a cheap one that could break very easily and soon need to be replaced.
Once a child is old enough to understand the concept of money you can begin to teach them about savings. Most children get money for a birthday or Christmas from adults who are not too close to the family. Why not buy a piggy bank where a child can keep small change and then open a savings account to deposit larger sums? If your child receives a cheque for a birthday explain to them that some of the money can be spent on a present or treat but that it is a good idea to put some aside for a future event. This could be to save up for a large item like a bike or for some spending money when they go on holiday. If you teach your children from an early age that saving some money for the future is a good idea then saving will easily become a habit for life. Making saving money a fun action is also important so if your child wants to buy a particular toy or something bigger you can work with them to draw a chart which will show how long it will take and mark off the weekly amounts as they are saved. This will teach them about the value of larger items and make them understand that some things take longer than others to get. Patience is an underrated virtue and by showing your child that they have to wait for what they want you will be helping prevent them getting into debt later in life.
Even having a jar in which you throw change can help you to get across the value of saving. The old adage of ‘look after the pennies and the pounds will look after themselves’ still holds true and this is a great lesson to help children appreciate the value of saving even small amounts of change. Saving money is such an important life skill that once imparted it will stay with your child for the rest of their days.
Helping Your Children Understand How Money Really Works Teaching your children how to develop financial skills and to understand the concept of affordability is essential for their personal development. So, even when you shop with a debit or credit card it is important to make children understand that this is real money you are spending and that it has to be paid back. You can also take time to teach children about how an ATM works and that it is not a money tree but is a machine that holds the cash you have earned by working. Just as important is to explain how the electricity and gas in your home has to be paid for so that you can cook, watch TV and keep warm. Just a simple explanation about these everyday matters will help your child to get a grasp of economics that will allow them to understand the importance of money and how it can be controlled. One of the most important life skills you can show your children is the concept of how money works and how to stay out of debt. Teaching them about how it costs money to borrow money, especially short term, and that debts can get out of control will help them when they are older and have to make independent decisions about financial matters. Showing your children how to be financially smart can lead them to a happier and more fulfilling life that avoids the deadly trap of debt and gives them a solid financial future.