Many of today’s wealthiest and most successful people owe it to what their parents’ told them about money. They never forget the advice they gave when it comes to finances. Believe it or not, your children will credit their success to you once they are older. This is because the best people that children really learn from are their parents.
So, what advice would you give your children about money? Here are seven of the best pieces of money advice that parents have given their children. And yes, their children were thankful for it!
1. Treat money with respect
As the old saying goes, “Money does not grow in trees”. It may be an old saying, but it’s as true today as it ever was. In real life, money is not given. It is earned. Because there is so much work and effort put into earning money, children must learn to consider it with high regard.
Children should understand that there is a cost to their lifestyle – mom and dad’s long hours at work, sleepless nights, and seemingly endless errands. It all begins with their mindset and attitude about money.
When they perceive and experience their parents’ hard work to buy their toys when they were young, they will approach money matters with honour and respect as they grow are older. Children who learn this early in life become wise concerning their wealth.
2. Don’t try to keep up with the Joneses (or with the Lees)
“It’s not how much money you make. It’s what you do with it that counts.” Many pitfalls toward financial turmoil occur when people compare their earnings with how much others make. This creates a mindset of ungratefulness and discontentment.
Train your kids to practice thankfulness, especially in this age of social media and consumerism. Teach your child that the rewards in life are not in the amount of money they make, but in the wisdom, they use to handle it in living meaningful lives.
Children who learn to focus on their own matters harness their energies wisely for their own benefit. This is so much better than tiring themselves out by comparing themselves with others.
3. Live within your means
One piece of conventional wisdom today says, “As your paycheck rises, so should your lifestyle.” Well, no, actually. I don’t agree with this at all.
As your children begin to work, it is important that they understand the importance of living modestly. Just because they can afford something they like, it doesn’t mean they should buy it. This is where children should understand the difference between needs and wants.
They must learn the balance of being thrifty and the appropriate times to splurge. The key to living within their means is discipline. Teach your children the importance of delayed gratification and why it’s okay to not have what they want when they want it.
One practical way children can learn this is by teaching them how to budget. Budgeting gives strict parameters in which money can be spent. Be creative and make it fun for your child to budget. As they grow older, they will be able to live within their means. Children who are able to hone this trait develop profitable skills not just in money but in life.
Money guru Dave Ramsey says that with kids, we need to “Show opportunity cost. That’s just another way of saying, ‘If you buy this video game, then you won’t have the money to buy that pair of shoes.’ At this age, your kids should be able to weigh decisions and understand the possible outcomes.”
Are you a parent of young kids and you’ve just begun your journey of parenting with financial literacy? We’ve got this article, Let’s Begin With You: 5 Steps To Financial Literacy Parenting, to help you get started.
4. Save money
There are numerous formulas and recommendations out there regarding saving. Just pick one that is suitable for your child! The important thing is that they learn to save.
Saving gives a healthy restraint to spending at the onset. Additionally, it prepares your child for unexpected instances where money must be spent immediately (like in an emergency). Saving is a deposit into your child’s future. Teach your child the value of their future and how saving can serve as a means to achieve that future.
Let your child practice saving early on by having a piggy bank at home and then by opening their own savings account at your local bank. Also, let them be accountable to you by checking on their saving habits from time to time.
During the tween years is a good time to begin teaching about long-term savings goals. Laura Shin, who writes about finance matters for Forbes says that at this age,
“you can shift from the idea of saving for short-term goals to long-term goals. Introduce the concept of compound interest, when you earn interest both on your savings as well as on past interest from your savings.”
What’s important is that saving becomes a habit. Furthermore, children who develop saving as a habit will carry it on into their adult life.
Don’t work for money. Let money work for you. In order to create wealth, you must have multiple streams of income. Although it may seem contrary to the first point, earning money shouldn’t always be in striving or in toiling. Teach your child that there are ways in which money can be earned passively.
Together with your child, research about various profitable mechanisms such as small-medium enterprises (SMEs), businesses, insurance, stocks, equities, portfolios, etc. in which they can allow their money to. Children who invest early have the benefit of time working for them. As they grow older, their investments grow with them.
6. Pay your credit card balance in full and on time
This is a tricky one. And it will only work for your child if healthy habits are in place. if done well, it will reap a great benefit in the future! Teach your children to pay their credit card balance in full and on time.
This habit will improve your credit standing and the rewards granted by credit card companies will be highly beneficial to your child. Furthermore, many of the things they need or want may be obtained freely through exceptional credit standing.
Money isn’t just for yourself or for your immediate family. One of the best attitudes towards money is that your wealth ought to be shared for the benefit of others. Teach your child the value of helping someone in need. Explain to them the reason why they it is good to help others and how serving others grows one’s love and appreciation of a person’s intrinsic value.
Train them to love others through giving. Search for a charitable organisation in your local community of a cause or advocacy which your child would love to support. Make sure it’s something they relate with and are emphatic about. For example, if your child likes animals, go for an animal welfare center. If he or she loves nature, there are always environmental groups that he or she can be a part of through giving.
If they learn this early it will become a lifelong habit.
Teach them to set aside a portion of their allowance for others and watch the bountiful benefits this will do for your children. Children who learn to give will grow up to be responsible, conscientious stewards of wealth.
As a parent, teaching financial literacy to your children is a process. Your child will not get this overnight. That’s all right. But make sure to guide them through their financial journey in both the triumphs and their failures. And create meaningful memories with your children regarding money. Also, partner with them for their growth, development, and success. Through these tested pieces of advice, money will serve you and your children and not the other way around.
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