Financial planning is not something we are born with. It’s definitely a habit that people gain throughout life. Unfortunately, most of us have spent years for searching a key to a better life by making mistakes and facing failures until we learn what money management is.
But why not try to avoid this for future generations and start teaching our kids financial literacy from a very early age?
Let’s approach this complex subject step by step.
Step 1. Saving habits
Even a lunch or pocket money may become a great start in a child personal saving strategy. Teaching your children to save at least ten per cent of their allowance will help them understand the value of saving and the opportunities it gives in the future. For example, it may help them buy something they have been dreaming of for a long time or something they don’t want to spend their special wish on while preferring to keep it for the birthday or Christmas occasion.
Step 2. Savings account
Though these two words may sound too complicated for a kid, in reality, opening an actual savings account may become an accurate representation of how saving works in adulthood. By analysing the account fluctuations, seeing the growth of the initial sum that you’ve put to this dedicated account together, your kids would feel that they are a part of something serious and would become more careful about finances and money management in general.
Step 3. Financial goals
Making a list is always a good idea to structure various aspects of your daily routine. When it comes to financial planning, this statement is getting even more relevant. Teach your kid to put financial goals by making a list of things or activities they want to get by some definite period of time. It could be a new gadget or a skateboard - anything that motivates them to save more. A clear financial goal will add visualisation to the whole money-saving process and make them more persistent in sticking to the initial strategy.
Step 4. Guidance on money management
Want your kids to make informed decisions? Try to instil in them the habit of writing down all the things they buy and the amount of money they spend during a week or a month. A simple comparison of money spent versus money received will help them understand why some shortages appeared and how they can avoid them in the future. Also, this will help kids to better plan for the future and be more patient in buying things that may wait for the next month, for instance.
Step 5. Support is essential
Try to explain to your kids that though financial planning may seem to require an adult approach, even a kid can cope with it. Making the first steps with your kids, supporting their initiatives, setting your own example are great ways to not only prepare your kids for the future but to become closer in one more complex subject.
In the end, teaching your kids financial planning is all about your readiness to explain sophisticated things in simple terms. But isn’t it something parents deal with almost every day?
