How can I teach my kids about money?

How can I teach my kids about money?

Financial Decisions for Kids
Financial Planning

Obviously a little cute toddler like the one pictured will never understand the meaning of money at such a young age however, teaching your kids about money when they’re younger can help them build good financial habits for the future.

You should consider the following as a guide:

Make it simple:

Credit: In a nutshell, you borrow money to pay for something with the intent of paying that money back within a certain time frame.

If your child borrowed money for lets say a car and he/she missed some payments, it could possibly lower their credit rating. It may also cause your son or daughter to pay more in the long run and prevent him/her from borrowing what they need in the future.

A child must understand that it is smart to borrow as little as possible unless it is necessary. In certain situations such as borrowing money for education or a house, a loan can be very beneficial and if your child has a good banking history this will go in their favour in securing a loan.

Look for teachable moments:

It is often easier to understand a concept through real life examples, such as:

  • While shopping with your child, pay for one purchase with a card and the other with cash, you will need to explain that the card is not free money and that you will have to pay the bank at a later stage.
  • If your child asks for an advance on his/her allowance, insist that he/she will have to pay it back by a certain date, just like you do with your own credit card.
  • Sometimes your children may request an expensive item that you simply cannot afford. It is important that your child understands that even if you use your credit card, this does not make the item attainable. If the item is charged now, you still may not be able to pay the full amount for the item when the bill arrives. This will mean that you end up paying more than the item originally cost which does not make good financial sense.
The bank of Mom and/or Dad:

Another way to teach your kids the value of money is to put your teachings into action, for example:

  • Allow your child to borrow a set amount of money from you (credit limit) and write down when they need to pay it back (due date).

If they don’t pay on time, charge them a late fee and calculate interest on the amount owed. This may be a case of tough love, but they’ll learn the lesson from you instead of from a less-forgiving credit company down the road.

Financial Advice:

We understand that it is not always easy to say no to our children and it is only natural to get the urge to spoil our kids. However, you do not need to be overly hard on your children’s financial approaches, but it is important to teach them valuable financial decisions so that they understand the importance of money growing up. Teach them to save and to make good financial decisions early on and they will thank you in later years.

Remember we are here to help you: To discuss your financial requirements, please contact a member of our financial specialist team today.