When it comes to learning smart financial habits, it’s always better to start early. After all, as a parent, you only want your kids to live comfortably and securely without having to worry about the struggles that come from mismanagement of money and having huge debts.
This is especially true when, according to Statistics Canada, about 26% of the Canadian population are struggling with their finances. But what are the best ways to teach your kids to avoid financial burdens? Below you will find four habits your can instil in your children from a young age so that they can learn the value of money.
1. Give them an allowance
One of the ways in which kids will start understanding the value of money is to have them handle money themselves. If you are constantly paying for your kids, they will never truly understand its worth. Giving them an allowance will help them learn how to manage their money permit them to make their own decisions on how they want to spend it. If you see that they are having trouble managing their money, ask them to track all of their expenses so that they know exactly what they need to do in order to have some money left over for savings.
2. Give them opportunities to earn money
Though giving them an allowance will help them understand the value of money, it’s also important for children to know how money is earned. Let them know that they can receive the unconditional allowance for the week, but if they would like to make more (for a new game or outing with friends), they can earn it by doing extra chores around the house. Make them aware that once they are old enough, they can get their very own job and earn even more. This will teach them that you have to work hard for the things you want.
3. Instil a habit of saving
Since children tend to learn by example, when it comes to building good financial habits, you want to make sure that they are not just watching you spend money, but that they are aware that you are also setting some aside for the future. To do so, it’s important to help them understand the concept of delayed gratification. One of the ways in which you can help them comprehend this is by setting goals for them. If they’re eyeing a certain product at the store, tell them how much money they would need to set aside per week in order to be able to purchase it by their chosen date. Doing this will not only help them understand the value of money, but will help them become more independent and self-disciplined. It will also help them understand how to budget their money — which is a crucial tool for good financial health.
When they are old enough to understand the value of saving, you can then open up a savings account for them. You can show them how their money can grow with interest or you can give them an incentive to save even more by telling them you will match the amounts that they put in.
4. Teach your kids to spend wisely
One of the most important things a parent can do is to set a good example for their children. When it comes to teaching your children smart financial habits, you should get your kids acquainted with the intricacies of spending. That means getting them to understand how to spend their money wisely. For example, if you are at the store with your kids, don’t just grab the items you need and go. Instead, explain to them why you are choosing certain products over others, whether it’s because of deals that the store is offering, or lower prices when there’s no discernible difference in quality.
Explaining your reasoning behind certain purchases will ensure that your children know how to pay attention to prices, as well as make smart purchasing decisions. After all, the most critical aspect of being in good financial health is not how much money you make, but how you choose to spend it.
If you are struggling financially and feel that you are unable to set a good example for your kids, reach out to a Licensed Insolvency Trustee (LIT) for a free and confidential consultation. Though being in financial distress is a heavy burden to carry, rest assured that there are many debt relief options that can be applicable to your personal situation.