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Last Updated on June 9, 2020
Financial management is an intricate part of leading a successful life, yet, it’s not something taught in schools. Children are educated on how to add, subtract, and multiply dollars and cents, but not much about the value of money, how to manage it, invest, and save for their futures. Ultimately, this lack of knowledge leads to adults haphazardly earning and spending money – and incurring a lot of debt along the way.
As any parent wants their child to have a better shot at life than they did, educating them on the significance of financial management early on sets them up for a brighter future. Below, are a few important money lessons your kids should know:
Money is Earned
The very first lesson children need to learn about money is that essentially, it doesn’t grow on trees. Requiring them to complete household chores, perform well in school, and other tasks for an allowance proves just that. They grasp the concept that money is earned through hard work and good behavior.
Savings and Goals
Talk to your kids about the importance of saving money. Express that sometimes things they want or need may cost more than they have at the moment. However, saving a little bit of their earnings goes a long way.
This is also the perfect time to teach them about setting financial goals. If they’re interested in buying a new toy, help them research how much it costs, and how much they need to save each time they receive an allowance.
Opening a savings account gets them familiar with the banking system, helps them to develop a habit of saving, and allows them to see how the value of their money increases over time due to interest.
Grow Your Money Through Investments
The financial market continues to evolve with each passing day. In this progressive world, children need to know things like the value of a US dollar, forex signals, the foreign exchange market, and even how bitcoin is mined. Teaching them to invest as early as possible helps them to develop financial habits that can generate multiple revenue streams for a secure future.
Talk to them about the importance of growing their money by creating a diverse portfolio of assets ranging from stocks and bonds to real estate and antique portraits. If you currently invest, show them your portfolio and how it has grown over the years.
There are stock market games designed for children to make learning about investing fun. You can take time each week to work with your child on using their digital funds and investing in various stocks. They can watch the market, see how their stocks increase, and learn when to sell without any real risks.
Once your child graduates high school the credit card offers will start rolling in. Unless you want them to end up with a ton of debt before they ever graduate college, it’s best to teach them how to manage it efficiently.
Have a conversation with your child about credit cards. Explain how they can be used to your advantage, but should not be abused. Stress the point that credit is borrowed money that has to be paid back with interest. Express what happens when payments are missed and balances get to high. Finally, discuss how their use of the credit card is reported and used by businesses everywhere to make decisions on whether they can have a house, car, loan, and even a career.
As important as money and proper management of it is to a person’s life, you’d think that schools would educate students on this rigorously. While there has been some progression towards getting more financial literacy material in schools, you can start educating your children at home on the value of money. Teaching them lessons like those listed above will help them develop solid financial management practices that will help them lead a more successful life.