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It is never too early to start teaching your children about managing their finances. If you experience financial stress in your life, is this because you had to learn the hard way? Did you have parents that actively taught you financial lessons during your childhood and helped you understand the value of money? A lot of us never had these lessons, but teaching our children about money will help to build solid financial habits and prepare them for the future. What are the best financial lessons?
Open a Bank Account
This is one of the best approaches because you are not talking about something hypothetically. Instead, it encourages hands-on learning so your children can see the consequences of poor financial management. The best place to begin could be to open a joint bank account with your child so your child and you can access it, but it can also stimulate that important conversation about managing finances. It also gives your children a sense of independence and real-life experience with you overseeing the process from a distance (if you want). Checking accounts come in different types, and you can click here to learn about the types of checking accounts on offer.
Provide Activities That Teach About Earning
Providing your children with the opportunity to earn money from a young age is essential. As parents, we can all feel that we need to give them pocket money but the reality is that for most of us we’re not able to tap into some magic money tree. Instead, you need to “commission” your children and offer them activities that they can complete to earn an allowance. You can break it down into chores they can complete, but you can also offer additional chores with specific amounts attached to them, where they have the choice to earn extra money.
When your child sees something that they want, you can point out the price and how much work it would take them to earn that so they can see why they need to earn enough money and how much effort it will take. They may think if they hold out for long enough, they will get it for Christmas or a birthday but if you give them a chore list with a value attached to it, it’s going to give them an incentive to get it sooner, but it’s also helping you in the process! 
Showing Them the Importance of Saving
We all need to understand the importance of saving money. As parents, we need to set examples for our children so they can see the importance of having enough money. Saving up for a rainy day is a solid financial step because it provides that buffer or that peace of mind.
Children don’t think about the unexpected expenses and depending on the age of your child, it may seem a bit too much for them to think about what would happen if they lost their potential to earn, but as your children get older, you need to offer them real-life examples and show your children how maintaining a savings account rather than blowing all of their earnings on a toy helps to account for certain issues when they come up.
Our children can learn the value of saving money to make larger purchases down the line, and this is why saving up for something they really want is one of those fantastic financial lessons.
Showing Them Smart Spending Habits
You want your children to learn how to live within a budget. We are all guilty of overspending especially when we have credit cards. So many people that didn’t grow up with an adequate financial education can often think that credit card is “free money.” And when we have to make big expenses in our lives, we can easily reach for the plastic. But smart spending habits are so important. When you set up a bank account with your child, they can track all the deposits that have gone into their account and all of their purchases via a mobile app. Your child needs to understand, not just where the money is, but where it went.
Help Them Create Budgets
As your children get older, budgeting is vital but you can still teach them how to budget from a young age without putting a financial tag on it. If your child wants a candy bar from the store, you can show them the impacts of buying this and how it stops them from saving for large items. Budgeting is such an important thing because we have to understand what comes into our account and what leaves. The less we spend the more we save. And while we don’t want our children to necessarily keep every single penny because this can cause them to be more shrewd, we’ve got to get the balance right. Life is about the quality of our expenditure after all.
Teach Them About Giving
One of the greatest financial lessons we all have is about benefiting others. Teaching our children about charity is an important part of the financial equation because it’s not just about saving and spending, but it’s also about realizing that there are children who have a lot less and in many cases can’t eat three square meals a day.
Many charities offer regular correspondence on how donations are used, which can teach our children a lot about the fact that money is not just about what we use.
Teach Them About Loans
Many resources tell parents that loans and credit cards are not to be touched, but your mortgage is a long-term loan from the bank, and it’s a good idea to teach your children that loans can be a responsible part of our lives if used properly. You can explain to your children how different types of lending works so your child is more prepared if they need to make big financial decisions.
Showing them the difference between a personal loan, credit cards, and mortgages can teach the about good versus bad debt, which will help your children understand the logistics and make better financial decisions throughout their lives.
