If you’re like many US citizens and me, things seem incredibly challenging when we don’t have much knowledge to deal with daily and even emergency expenses. That’s why I don’t want my kids or your kids to feel the same in the coming years. After all, one of the basic life skills that your kids can learn is financial management. Here are four reasons why you should start cultivating financial management skills in your children as early as possible.
Capability to Handle Money Responsibly
One of the most important things that your kids can learn from you is how to handle money responsibly. It means they will know how to budget their money, save for their future, and even invest in something that will grow over time. According to a study done by Harris Poll on behalf of NerdWallet, “70% of American adults with children under 18 say they have never talked to their kids about money.”
This is a very alarming number because it means that most of us are not comfortable talking about money with our kids. If we don’t talk about it, how can we expect them to learn about it?
Ability to Save for Things They Need
Another reason you should start cultivating financial management skills in your kids is that they will be able to save for things they want or need. For example, if they’re going to buy a new toy, they will know how to save their money to buy it without putting themselves into debt. According to a Financial Industry Regulatory Authority (FINRA) Foundation study, “57% of American adults say they have saved for a major purchase over the past year, but only 30% say they have enough savings to cover unexpected expenses.” Most of us are not good at saving for our future, and we often rely on credit cards to make ends meet.
Fewer Risks to Fall Into Debt Later in Life
People usually neglect the fact that debt can have a very negative impact on our lives. It can ruin our credit score, put us into a never-ending cycle of debt, and even lead to bankruptcy. That’s why you should teach your kids about the dangers of debt so they will be less likely to fall into it later in life. A study done by the National Foundation for Credit Counseling (NFCC) found that “65% of American adults say they have more debt than they can handle.” It is a very alarming number, and it just goes to show how many people are struggling with their finances.
In conclusion, teaching your kids about financial management is one of the most important things you can do for them. It will set them up for success in the future, and it will help them avoid the pitfalls of debt. So, start cultivating financial management skills in your kids as early as possible. The best way to do that is by setting a good example for them. So be an ideal role model for them.
Children learn by observing the behavior of those around them, so one of the most powerful ways to teach kids about saving is by setting a good example. Show your children that you prioritize saving money by discussing your savings goals and strategies openly. Let them see you making conscious choices like comparing prices, using coupons, and avoiding impulse buys. Another way to set a good example is by involving your kids in family financial discussions when appropriate.
When it comes to teaching kids about money, offering them an allowance can be a powerful tool. However, instead of just giving them money to complete chores or tasks, consider adding a twist to make it more educational and impactful. One way to do this is by dividing their allowance into different jars or envelopes labeled with categories like saving, spending, and sharing. This helps children understand the importance of budgeting and allocating funds for various purposes. Another idea is to match a percentage of what they save in their piggy bank or savings jar.
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