Teach your kids financial literacy
During the current hard times we are all experiencing it seems timely that we should consider teaching our kids financial literacy as early as possible.Our attitudes towards money are, to a great extent, shaped by our parents. And yet, according to a study, less than 50 % parents admit to teaching their kids about finance.
These days kids are very fashion conscious and brand sensitive at a young age. They have high expectations, especially when their friends have such coveted items as ipods, handphones, PSP’s and luxury holidays abroad. And who can blame them?
This is all the more reason for us to help them get a financial grip on money and the need for saving by talking to them early and often about ways to save and spend money responsibly. If we teach them while they are young, hopefully they will avoid the credit card trap in their later years and save for a rainy day.
The recession has presented parents with the ideal opportunity to educate our kids and help them develop a healthy attitude towards money. Here are some practical ideas that you can use to this end:
Practice what you preach. Children learn best by observing their parents. If your kids grow up seeing you save money, they are more likely to do the same later. Make it a point to explain to them how you take steps to save money and avoid wastage.
Discuss wants and needs. Kids often find it difficult to understand the difference between a 'want' and a 'need'. They think they need the latest iphone because their best friend has one. Explain that everyone has a limited amount of money and most people need to prioritize their spending. Paying the mortgage or rent, buying food, paying bills and saving must come first. Kids often think that adults can just go to the money machine and get more money - they don't think about where it comes from and what you need to pay for in order to live.
Discuss pros and cons. Next time you are planning a big purchase, bring your kids along when you shop around. Discuss the pros and cons of the deals offered and whether or not they represent good value. For example, a gift with purchase versus a discount is only a good deal if you really need or want the gift on offer. You’ll be surprised how much your kids will learn from such discussions.Give an allowance. Rather than giving kids the money they ask for, give them a fixed allowance. This will teach them to prioritize on how and where they spend 'their' money. They will also have to decide between spending the money and saving it for future use. This is also a great way of getting your kids to reign in their phone bills… if they have to pay the bill for their handphone out of their allowance, they will be more careful.
Teach them the value of money. Once you have settled on an allowance 'amount,' don't indulge them with liberal advances. If you must, charge them an interest - this way kids learn that everything good has a price. Likewise, if they save for something you could reward their patience by topping up their savings with a little interest, thereby teaching them the value of compound interest and savings.
Let them earn. One way of teaching your kids to value money is by letting them earn it. You can pay them to do chores such as washing the car, running errands, or helping with chores. You could even make a deal whereby they clean out the attic, for instance, and keep the money earned by selling the unwanted stuff that comes out.
Encourage business skills. Encourage entrepreneurial skill in your kids by helping them find ways to raise money. For instance, they could easily earn good pocket money by running a dog walking service for neighbours.
Open an account for them. Most banks have accounts for children that don’t charge fees and many offer fun rewards and gifts to encourage youngsters to save.
Play games. If your family doesn't embrace the allowance concept but still wants to help your children have first-hand experience with money management, another way to teach them about money is through interactive learning experiences and board games such as Monopoly and Cashflow for Kids.
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