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Teach Your Children About Money
I firmly believe that if we'd been taught more about investing and basic money management in high school (and younger!) my generation wouldn't have some of the financial troubles that they do. I was lucky enough to have parents who taught me those lessons at home, but many of my friends weren't so lucky. I don't think much has changed for our own children. The schools just don't have the time or resources to focus on basic money skills so it's up to us as parents to educate our children.
We have to teach by example. If our children see us spending money on credit cards they think that the little plastic card is all you need to get your hearts desire. We need to show them that the little plastic card produces a bill each month that must be paid. Pay it in full so they can learn the habit early.
Some people are hesitant (or refuse) to involve their children in their financial affairs. Up to a certain age I would agree. But at some point you need to involve your children at least a little bit so they can learn the process of money management and it will help keep you accountable for your actions. Having to explain your frivolous purchases to your children can quickly alter your own habits.
Your ultimate goal is for your children to be better off than you are. If you dont teach them about how to manage money they could easily become worse off in their adult years. Dont burden them with ignorance. If you dont feel qualified to show them proper money handling skills then enlist the help of qualified professionals or family members who are skilled with money. The goal is not perfection. Its basic education and hopefully preventing the already catastrophic credit card debt from spilling over into the next generation.
My favorite example of teaching money management within the home was setup by the Dilley family. They had sextuplets several years ago and learned a way to teach their children good behavior and money management at the same time. The kids earn Dilley Dollars for doing their chores and good behavior. The dollars are redeemable for video game time or can be converted to real money (50 cents real money for every Dilley Dollar) which can spent on real things. The kids are taught to save some of it and they learn to appreciate what it takes to make money in this world.
Whatever system you come up with, stick with it. Make your children accountable for their own spending habits and be accountable to them for your decisions. Admit your mistakes and do your best to lead them down the right financial path. Stick with the consequences of poor judgment. Of course you are the parent and make the final decisions, but the more you can involve them in the money processes of your household the better off theyll be when they step into the real world on their own.
BONUS : Teach Your Kids How To Look After Money
It is a sad fact but many people retire only to live in poverty. After working forty odd years and over that time earning hundreds of thousands of pounds many have very little to show for it.
What happened to it all? Well, most of it would have just slipped through your fingers. Why? Well, schools are very good at teaching us many different subjects including maths, but the one thing they do not teach is personal finance and how to make money work for you rather than you working for money.
So where can our kids learn about personal finance? Well, it is up to us as parents to teach them. Trouble is many adults are not too good at looking after money either, again because we were not shown how to in our youth. Let us face it in most households money matters are not discussed between parents and children. Now I am not suggesting that we start showing mortgage and bank statements as some parents, especially with pre-teens and teens, may find an admission of their financial status embarrassing.
What we can do is advise our children of the pitfalls and dangers that await them in later life. Draw from your own life experiences and dealings with banks and other financial institutions. The fact that at certain times in our lives things are going to happen that will affect our personal finances. Certain things will be out of our control and not of our own making, but there will be times where a choice has been made that "seemed like a good idea at the time". We have all been there, done that, only to pay a price at the end.
So, how and when do we start them off? As young as possible, usually by the time a child is about 3 years old they know about pennies and pounds and understand the concept of handing them over in order to purchase goods. Hand over enough pennies and they get the lollipop they want at the sweet shop.
Here are some tips and ideas to help your kids start on the right path to financial prosperity.
* Buy a piggy bank for your younger children. Allow them to choose whatever colour shape or size they wish. Invite them to put their pennies into their piggy bank. Occasionally they may count their pennies and reward themselves if they want.
* Once they have proved themselves adept to handling their pennies, take them to open their own bank accounts. Most major high street banks and building societies have special savings accounts for kids. Depending on their age group, they may be offered some incentives e.g. fun packs, money-off vouchers for CDs, DVDs, computer games, etc.
* Many kids think, "money grows on trees". Let them know that YOU working brings about this paper and metal stuff called money. Whether or not you work or you have inherited a large fortune, do not encourage laziness in your child. I am sure there are loads of chores around the house, washing the dishes, cleaning the rooms, etc. Give your kids an allowance but let them work for it. They also need to be able to work for free sometimes to learn the value of hard work.
* Many relatives nowadays tend to give money for birthdays and Christmas especially for the over 10s. At this age, their tastes are constantly changing (what a 12 year old and a 60-year-old see, as being "the in thing" is usually very different!) Encourage them to save 10% of their money gifts. If they are older and have a paper round or something similar, again encourage them to save 10 % of their earnings. This may be only a small amount but it is a good habit to get into. If you are reading this now, as a middle-aged parent, imagine how much you would have in the bank today if you had saved 10% of everything you had ever earned. Scary stuff!
* Managing money does not mean hoarding it and locking it away forever. It simply means being careful, spending wisely, and acquiring a regular savings habit. Teach your kids that donating money to worthwhile causes is a noble thing to do. This could be to the local hospice, the homeless, or to a charity of their choice. This would help them become more rounded, more respectful of others regardless of the situation and become more appreciative of their own lives and their own prosperity. They would learn that the money returns to you in more ways than you could imagine.
* Encourage your child to purchase a journal or a diary where they can record their dreams and desires. This allows them to dream big and look forward to their lives ahead-filled with prosperity. There is nothing wrong with accumulating wealth to fulfil these desires. Money is not evil!
* "Filthy lucre" and "Money is the root of all evil" are phrases you will often hear people say. Ignore them. Money actually brings enormous good into the world. Creating wealth helps create jobs for others. Investing in business helps to bring solutions into people's lives by way of innovative products and services. Acquiring a great fortune allows you to donate more money to charity - or even start your own trust fund. Therefore, as you can see money is neither good nor bad - it is what you do with it that makes the difference.
* One of the oldest wealth-creation maxims is, "It takes money to make money". Unfortunately, it also takes money to lose money. Teach your kids the value of caution when entering into financial affairs. Remember the golden rule of any high-risk venture. Only invest what you can afford to lose. Moreover, let them know that many self-made millionaires started with literally nothing.
* Debt is one of the greatest social diseases of our time. The price to pay for the "have now, pay later" philosophy is that you certainly will pay later. Unfortunately, some high street banks have contributed to this philosophy. My own bank had posters in the branch stating "why wait, have it now!" Debt imprisons you in a job you do not like, creates stress and anxiety in your life, and erodes your wealth creation program. You will never become rich while you are in debt. Teach your kids the value of delayed gratification. "If in doubt, go without".
* Your financial health is really the difference between how much you earn and how much you spend. It therefore makes sense not to pay any more money for something than you have to. Teach your children that bargain hunting does not make you a miser just a sensible individual. If you see the same item in two different shops with a £20 price tag difference, from whom are you going to make the final purchase?
* Eventually everyone is offered a "sure-fire" method of making a fortune, whether it is the three-card trick, an once-in-a-lifetime investment plan, or some time-limited business opportunity only available to a select few... Always check these "opportunities" with a fine toothed comb. Do not part with any money and remember - if it is too-good-to-be-true it is usually is. Teach your kids that wealth creation is a simple and timeless process based on common sense.
Silly question - If you had learned the above principles when you were 10 years old, and had applied them every day of your life, would you be financially healthier today?
What are you waiting for? Teach your kids the timeless truths of acquiring and keeping wealth. Like most parental advice, they probably will not appreciate it now. In later life, they will be thankful that you did. Knowledge truly is the most precious gift you can give.
It is a sad fact but many people retire only to live in poverty. After working forty odd years and over that time earning hundreds of thousands of pounds many have very little to show for it.
What happened to it all? Well, most of it would have just slipped through your fingers. Why? Well, schools are very good at teaching us many different subjects including maths, but the one thing they do not teach is personal finance and how to make money work for you rather than you working for money.
So where can our kids learn about personal finance? Well, it is up to us as parents to teach them. Trouble is many adults are not too good at looking after money either, again because we were not shown how to in our youth. Let us face it in most households money matters are not discussed between parents and children. Now I am not suggesting that we start showing mortgage and bank statements as some parents, especially with pre-teens and teens, may find an admission of their financial status embarrassing.
What we can do is advise our children of the pitfalls and dangers that await them in later life. Draw from your own life experiences and dealings with banks and other financial institutions. The fact that at certain times in our lives things are going to happen that will affect our personal finances. Certain things will be out of our control and not of our own making, but there will be times where a choice has been made that "seemed like a good idea at the time". We have all been there, done that, only to pay a price at the end.
So, how and when do we start them off? As young as possible, usually by the time a child is about 3 years old they know about pennies and pounds and understand the concept of handing them over in order to purchase goods. Hand over enough pennies and they get the lollipop they want at the sweet shop.
Here are some tips and ideas to help your kids start on the right path to financial prosperity.
* Buy a piggy bank for your younger children. Allow them to choose whatever colour shape or size they wish. Invite them to put their pennies into their piggy bank. Occasionally they may count their pennies and reward themselves if they want.
* Once they have proved themselves adept to handling their pennies, take them to open their own bank accounts. Most major high street banks and building societies have special savings accounts for kids. Depending on their age group, they may be offered some incentives e.g. fun packs, money-off vouchers for CDs, DVDs, computer games, etc.
* Many kids think, "money grows on trees". Let them know that YOU working brings about this paper and metal stuff called money. Whether or not you work or you have inherited a large fortune, do not encourage laziness in your child. I am sure there are loads of chores around the house, washing the dishes, cleaning the rooms, etc. Give your kids an allowance but let them work for it. They also need to be able to work for free sometimes to learn the value of hard work.
* Many relatives nowadays tend to give money for birthdays and Christmas especially for the over 10s. At this age, their tastes are constantly changing (what a 12 year old and a 60-year-old see, as being "the in thing" is usually very different!) Encourage them to save 10% of their money gifts. If they are older and have a paper round or something similar, again encourage them to save 10 % of their earnings. This may be only a small amount but it is a good habit to get into. If you are reading this now, as a middle-aged parent, imagine how much you would have in the bank today if you had saved 10% of everything you had ever earned. Scary stuff!
* Managing money does not mean hoarding it and locking it away forever. It simply means being careful, spending wisely, and acquiring a regular savings habit. Teach your kids that donating money to worthwhile causes is a noble thing to do. This could be to the local hospice, the homeless, or to a charity of their choice. This would help them become more rounded, more respectful of others regardless of the situation and become more appreciative of their own lives and their own prosperity. They would learn that the money returns to you in more ways than you could imagine.
* Encourage your child to purchase a journal or a diary where they can record their dreams and desires. This allows them to dream big and look forward to their lives ahead-filled with prosperity. There is nothing wrong with accumulating wealth to fulfil these desires. Money is not evil!
* "Filthy lucre" and "Money is the root of all evil" are phrases you will often hear people say. Ignore them. Money actually brings enormous good into the world. Creating wealth helps create jobs for others. Investing in business helps to bring solutions into people's lives by way of innovative products and services. Acquiring a great fortune allows you to donate more money to charity - or even start your own trust fund. Therefore, as you can see money is neither good nor bad - it is what you do with it that makes the difference.
* One of the oldest wealth-creation maxims is, "It takes money to make money". Unfortunately, it also takes money to lose money. Teach your kids the value of caution when entering into financial affairs. Remember the golden rule of any high-risk venture. Only invest what you can afford to lose. Moreover, let them know that many self-made millionaires started with literally nothing.
* Debt is one of the greatest social diseases of our time. The price to pay for the "have now, pay later" philosophy is that you certainly will pay later. Unfortunately, some high street banks have contributed to this philosophy. My own bank had posters in the branch stating "why wait, have it now!" Debt imprisons you in a job you do not like, creates stress and anxiety in your life, and erodes your wealth creation program. You will never become rich while you are in debt. Teach your kids the value of delayed gratification. "If in doubt, go without".
* Your financial health is really the difference between how much you earn and how much you spend. It therefore makes sense not to pay any more money for something than you have to. Teach your children that bargain hunting does not make you a miser just a sensible individual. If you see the same item in two different shops with a £20 price tag difference, from whom are you going to make the final purchase?
* Eventually everyone is offered a "sure-fire" method of making a fortune, whether it is the three-card trick, an once-in-a-lifetime investment plan, or some time-limited business opportunity only available to a select few... Always check these "opportunities" with a fine toothed comb. Do not part with any money and remember - if it is too-good-to-be-true it is usually is. Teach your kids that wealth creation is a simple and timeless process based on common sense.
Silly question - If you had learned the above principles when you were 10 years old, and had applied them every day of your life, would you be financially healthier today?
What are you waiting for? Teach your kids the timeless truths of acquiring and keeping wealth. Like most parental advice, they probably will not appreciate it now. In later life, they will be thankful that you did. Knowledge truly is the most precious gift you can give.
