Men and women are constantly embracing different ways to be financially responsible. A majority of them fail and live from paycheck to paycheck. How can adults avoid financial disaster? There is no better way than to start early. Parents have a task of cultivating good financial habits in their kids. How do you teach children to be financially responsible?
Talking about Money
Parents should communicate with their children about the financial decision they are making. It includes talking about the family’s financial goals and budgets. Teaching that money is finite and you need money so that you can spend it, will cultivate a culture of living within their means. Train children to always have a budget and to follow it which will make them accountable. Encourage the children to avoid buying stuff as soon as they get money by getting a plan first.
Have a consistent allowance policy
Whether the allowance is for household chores done or just a free allowance, parents should give the same amount within a certain duration. The allowance is an opportunity to teach money management. Train them to always save and give a certain percentage of any amount they earn or receive before spending the remaining amount. When it comes to saving, children should learn about medium and long-term saving goals. Introducing the power of compounding interest will motivate the child to save even more.
Educate them about choice and consequences
Allow the children to make financial decisions especially on how they spend their allowance. Ensure that they keep track of their spendings and their incomes and never give advance allowance or earnings. If they need something, make it clear that they might have to forego something else. Encourage delayed gratification by making them save for something they need rather than buying now and paying later. It will help them avoid debts in the future.
Make them work
A great way to nurture a working adult is by explaining to them the difference between wants and needs. A parent should provide for needs and the kid has to work for their wants. For teenagers, let them learn how to pay bills by making them pay for their own cell phone and internet bills. Nurture entrepreneurship by allowing them to do tasks beyond usual chores. Explain to them about investing and assist them if possible.
It is important for a parent to have great financial practices before passing them on to the kids. They need to practice what they teach. Parents need to teach the above lessons early enough as kids adapt easily.