It’s funny how a piece of paper can impact people’s lives nowadays. Money has unarguably become a vital part of society. It allows people to transact, buying items of necessity and interest and selling products for profit. Unfortunately, money management isn’t an innate ability. It is taught, and the sooner you start teaching it to your children, the quicker and more masterful they can wield it when they grow up.
Talking About Money With Your Kids
Experts suggest talking about finances the minute you come home from the hospital. Children tend to pick up on things you do than the things you say. Thus, it is vital to establish disciplined behavioral patterns when it comes to money. Talk often and talk calmly when speaking about it.
What They Should First Grasp
Children should first learn that money has value and spending it diminishes that value. When shopping with children, experts suggest paying with cash instead of plastic. Cash is tangible, straightforward, and not really complex. Credit and debit cards, on the other hand, tend to be more confusing. Children may grow up thinking that a magic card gets them anything they want with a few simple swipes and signatures.
Establish an Allowance Policy
Giving your children school allowance provides them the opportunity to learn about cash flow firsthand. When and how much you should give them is entirely dependent on you, the parent. Some parents handing out allowances as early as elementary school with infinitesimal amounts ranging from $1 to $5. Regardless of your allowance structure, be consistent. This enables children to budget and save money based on the consistent flow of allowance they expect to get every day or week.
Open a Bank Account
With this step, involve your children as much as possible. From picking the bank to signing the paperwork, be sure they have a say and that they are aware of what’s going on. Having a savings account encourages your children to save money and teaches them about the importance of saving for rainy days or whenever they want to buy a toy or book.
Encourage Entrepreneurial Ventures
Entrepreneurial ventures teach children a ton of things about finances. It encourages them to think of ideas that fill a need or demand while also providing real-life examples of concepts like cash flow, net profit, and capital allocation.
Teaching children to be financial literate is an invaluable investment for their future. It ensures they have the prowess to overcome financial challenges like paying for utility bills, budgeting monthly paychecks, and avoiding debt.
David Milberg is an investor from NYC.