It’s no secret that having a solid financial education can set a child for a successful and secure future. Starting on the right path and that too, early on can help them prepare for a sound financial base which will eventually make them successful in life.
Here are simple ways to learn how to save and spend wisely, and develop good money habits:
1 Allowance for Chores: Kids should contribute to simple household chores and while they do so, parents/adults should ensure that the kids are paid on account of doing so. There are numerous benefits to having a consistent system of paying children for chores. Kids will learn that money comes from hard work and that their contributions to the house are appreciated. They also learn how to help care for their home. Above all, they will have their own regular source of income which will give them an opportunity to learn as to how to manage their money.
2. Reward to Kids for Good Grades: Rewarding kids for good grades can have just as many benefits as paying them for chores, in terms of helping them understand the connection between hard work and success as also, giving them a financial opportunity to develop good personal spending habits.
3. Instill Savings habit: Kids must be encouraged to make good spending decisions. This involves guiding them to set aside money that is not for spending. Any money that is being given to them as part of the chore allowance or as a reward for good grades must not be spent entirely. Kids should be taught to save a portion of the money received. This will instill saving habits in them which eventually set them up for larger savings goals, like saving for college etc.
4. Learning the Difference between Wants and Needs: Kids must be taught to understand the difference between wants and needs. This will inculcate wise spending habits in them from a very early stage. Occasionally, “wants” may be pricier versions of “needs” where the extra cost is more of a luxury than a necessity. Being able to distinguish between wants and needs, will guide them in making wise monetary decisions on a day-to-day life and in a long run build a sound financial foundation.
5. Learning to build a Budget: By distinguishing between needs and wants, children can make more responsible purchasing decisions and avoid impulsive spending. Learning to budget helps children build savings for emergencies or future goals, reducing reliance on credit cards and loans. One of the preliminary steps to introduce kids to the concept of budgeting is to include them in the family budgeting process and that way, they get to prioritize needs over wants. This eventually paves the path for them learning to create budget for themselves which could initially be a 3 column worksheet which includes columns for Goals , savings and cost. They can have short term saving goals for themselves and thereby, become a smart spender.
