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Teaching kids the value of money and how to manage it properly from a young age is possible. See these tips on how to raise financially savvy kids to enable them to make wiser financial decisions as they advance into adulthood.
Teaching your kids the importance of savings is one of the most vital financial lessons you could ever teach them. This is especially true when it comes to saving up money to buy a big-ticket item that may take some time to save up for. On the flip side of the coin, with learning the value of savings comes learning the value of patience, both of which are necessary to achieve to make wise money-related decisions. Learning the value of patience also means waiting for the right time to make that long-awaited purchase to avoid falling into the trap of buying anything they want to on a whim irrespective of if they really need it or if they can afford it or not.
Credit can be a good thing
While credit can be a bad thing if misappropriated, teaching your kids about the necessity of having a good credit score is important. Again, showing them practical examples of how credit actually works can help to prepare them for the real world when faced with similar situations. Undoubtedly, the biggest lesson when it comes to managing credit is to ensure that interest repayments are paid back on time to avoid incurring additional interest charges. Furthermore, you could also teach them the difference between good credit and bad credit examples too so that they avoid using credit as a crutch to escape challenging financial situations.
Some practical examples
Teaching your kids how to manage money using practical examples is often a better way to learn as opposed to using theory to learn about money management. Moreover, telling them about the significance of how to go about applying for a mortgage, for example, is a life lesson that many young adults should be exposed to long before they even consider purchasing their first home. You could start off with simple concepts such as how to draw up a budget, how to save up for a deposit and as they grow older you can progress to more complex topics such as refinancing options, and how there may be other financial considerations to set money aside for such as insurance and property taxes and how to calculate these. For example, when it comes to property taxes, this is one of the simpler equations to learn that includes calculating the assessed rate and multiplying it by the tax rate to get the property tax amount.
Raising funds to reach their financial goals
Another aspect of money management is the raising and acquisition of startup capital to reach their financial goals. Apart from finding part-time jobs to earn money, you could also encourage your kids to start their own businesses as well. Nowadays, more and more kids are starting their own businesses. In fact, it’s not uncommon to see kids in elementary school practicing entrepreneurial skills and starting up fledgling businesses even at their young ages. And if they should need additional funding for future big investments then they can acquire funding through external parties such as angel investors, loans or microloans, or crowdfunding for example.
In conclusion, money matters are a serious matter and are vital lessons to teach younger generations to ensure they can manage their finances responsibly well into adulthood when it comes to financial decisions both big and small.
Article written by Laura Pearson