Paying bills, calculating taxes and choosing wise investments seem like quintessentially adult activities. But if you think about it, effective financial planning is really about developing good habits — and everyone knows good habits should be inculcated at a young age.
Instilling financial planning skills in your children can be a fun and rewarding endeavor. And if they manage their money well when they're young and the financial stakes are low, they'll be well-prepared for the challenges of money management when they're older! Try these tips for starters.1
1. Earning money
Most parents struggle to incentivize their kids to do household chores. Why not offer them allowance based on the chores they complete? Washing the dishes and vacuuming might seem a lot more attractive if they can use the extra money to save up for that new gadget they've been eyeing.
2. Creating a "savings plan"
Teach your kids about the rewards of saving money by offering them interest on the money they save. Some parents report success in offering their children 2-3% interest monthly on the money they save. Kids soon learn to delay gratification for greater rewards.
3. Distinguishing wants and needs
Have a chat with your child about the difference between wants and needs. Have them list down all the necessities associated with their day-to-day life: school fees, food, rent, bills, etc. The exercise will teach children to prioritize spending — and scare them straight, with the sheer amount of non-optional spending in day-to-day life!
Sources
- https://www.investopedia.com/personal-finance/10-tips-teach-your-child-save. Visited 4 March 2017.
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