Just as important as your child’s education are their financial habits. Once they’ve graduated and established themselves in their careers, they’ll need the knowledge and discipline to make wise financial decisions.
But these habits don’t begin when they start working. They are established early in life. Parents can teach their children valuable lessons that influence their financial well-being for years to come.
Teaching the Basics
By teaching your kids financial lessons early in life, you’ll help them avoid many of the most common mistakes people make. Of all these mistakes, excessive spending probably plagues the most people.
Having self-control when it comes to spending will help them avoid the debt that many people find themselves in, while establishing a foundation for healthy saving habits.
It’s been estimated that at the age of 7, children have already developed their money habits. So, starting early is a big step towards setting them up for success.
1. Make Conscious Decisions About Spending
Teaching kids that money is a valuable resource and should not be taken for granted is the most fundamental financial lesson they can learn. Young children must be taught the finite nature of money.
By teaching them to think through the impulse to buy something, you’ll be giving them the clarity vital for future purchases, and an important tool in avoiding excess spending.
2. Delay Gratification
Children don’t like to wait for the things they want. It’s human nature to pursue immediate gratification. When children learn how to delay their desire to purchase something, they develop a habit that can provide tremendous value to all areas of their lives.
It’s a lesson that influences the success they achieve as adults. It allows them to consider short-term versus long-term objectives. Your child should learn to set a long-term saving goal to purchase items that cost more. This is a good opportunity to introduce the concept of earning interest on savings over time.
3. Compound Interest Grows
When children learn the concept of compound interest, and how it can be used to grow their money, they are more likely to save. It’s a good idea to let your child open a savings account. This is an important first step in a child’s financial education.
Younger children can also get into the habit of saving by having their own piggy bank in their room. As they see you adding change over time, they become aware of the habit of saving at a very early age.
The key to teaching your child the valuable financial lessons in life is to start early. Many of the lessons you teach them will be remembered over time and influence their financial health in the future. You’ll make in invaluable investment to their financial success and prosperity.