As with many other areas of development, kids have formed financial habits by age 7 according to Parents magazine. And if poor habits persist through adolescence, it becomes more difficult to right the ship.
If you want your child to have a healthy relationship with money when they leave the nest, now is the best time to act. By teaching them the fundamentals of financial literacy, you can help them build a lifestyle of sound money management, which will significantly benefit them well into adulthood. The following are a few tips to keep in mind as you steer your child toward financial literacy and good habits!
Include Your Child in Financial Conversations
Invest Blue notes that simply talking about money with your kids nearby can help them develop a healthy relationship with it. For example, if you and your partner are strategizing your budget, discuss it in front of your child. Even if you are trying to tackle debt, let your child see the pain and hard work that comes from it.
The ultimate goal is for your child to know how to identify their income limits, create good spending habits, create income from Investment Assets vs. from Working at a Job, and learn how to save toward their goals – perhaps even starting a business. Allow your child to witness you live it out.
Talk to Them About Investing
Investing is a little more advanced than budgeting, but it is still a good idea to introduce kids to the concept early. For example, if you are keeping stocks or bonds, take time to explain the process to your child. Paint a picture of how markets work, and teach them about risk and reward so that investing feels more accessible when they get older.
Homeownership is also an excellent concept to teach your child at a young age. Talk to them about how owning property can help them build up their assets and strengthen their financial security. Dive into buyer’s and seller’s markets and other factors that impact a property transaction, such as inventory and economy.
Teach Them About Budgeting
There’s no shortage of different methods you can use to maintain a healthy budget. And over time, your child is likely to modify their budgeting approach many times. The key is to help your child develop a firm grasp of budgeting basics so they can successfully manage their money.
Budgeting can be reduced to two principles: spending and saving. Your child should learn how to spend the money they earn, how making more money gives them more spending options, and that money is a limited resource that depends on income. Teach your child how to prioritize how to allocate funds and always know how to cover essentials like housing, food, and utilities first.
Show your child how to spend money intentionally rather than impulsively. Also, your child needs to understand that spending is not harmful. Being frugal is a positive thing, and spending becomes bad when allocating resources you do not have.
Don’t Expect Perfection
As parents, we would love to guarantee that our kids never stumble through life. In reality, however, the best you can hope for is that your child makes some minor financial mishaps but avoids financial catastrophes.
Don’t worry about preventing your child from making all financial mistakes. The ideal approach is to allow them enough space to make their own decisions, teach them to be aware of their circumstances, and learn from their poor choices.
Furthermore, your child mustn’t feel like you judge them as they make financial decisions. Prioritize building trust with your child and show them that you want what is best for them. This will leave them more apt to follow your advice and guidance.
If your child is ready to begin their financial literacy journey, don’t wait to teach them. Remember to talk about finances around your child and show them the ins and outs of investing. Also, teach them how to create and maintain a budget, and don’t be surprised when they make mistakes. Before long, your school-aged child will be a financial guru entering adulthood!
Post authored by Cody McBride of TechDeck