Investing, that was once an adult-exclusive topic, is now slowly being introduced to kids. Supported by a study made by Cambridge University that found that money habits in children are formed as early as seven years old.
With this in mind, it now becomes crucial for parents to educate kids about the value of money and to help them develop habits on how to spend it wisely for the goal of shaping them into wise adults.
Likewise, being a good role model for your child plays a vital role in honing their money-spending habits, which will have a significant impact on their attitude towards money in the future.
Here’s how you can teach your little ones the importance of money and saving:
Reward them for reaching goals
Set a saving goal for them and motivate them with their favorite things once they reach that goal. It may not be grand, but something like their favorite candy or chocolate drink will do. While they are still young, kids need to think that investing and wisely spending money results in even better rewards. That way, their mindset towards thriving to spend is directed to greater results.
Help them track spending
Encourage them to think about how their spending patterns can help them achieve their goals faster. Help them make a tracker, as simple as a table or a bullet journal, where they could write the things they bought with their money. Explain to them how their spendings have a direct impact on how they prioritize things. Slowly, educate them on how they could allocate their money only on those necessary things.
Explain Wants vs. Needs
Defining the difference between these will only help them make better decisions in the future. Doing so can help them differentiate the things that they should prioritize and those that they don’t really need. This will help them realize the importance of money and will encourage them to spend it wisely.
Leave room for mistakes
Don’t be afraid when they may make mistakes. Learning from their own mistakes can help them avoid making the same decisions in the future. Keep in mind that they are still young, have a lot of things to work on, and that they have to take everything slowly. Kids tend to mess up, especially when they are just starting to learn new things. This is why it’s essential to leave room for improvement every time. Not only would this help them learn things on their own, but they can also develop resilience and confidence as they grow up. Through this, they’ll be able to make wiser decisions as time goes by.
Be an example
Save money and make wise long-term investments that would prove your money’s worth. Such as stocks, bonds, and real estate! Examine your attitudes towards money and how your kids are interpreting them. More is caught than taught; whatever they see becomes their ‘truth’ for a while until they develop their understanding of things. Them developing money-spending and investing skills also depend on what they observe from the adults in the house.
Learning from experience is one of the best ways to acquire knowledge. So while they are still young, give your kids the first-hand experience of how to budget and spend their own money.
Moreover, it is crucial to explain the importance of investing wisely. It can be stocks, bonds, or real estate. One good example is owning a home in the future, which could also be a good source of income-- one that grows its value as time goes by.
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