Many individuals enter into adulthood wishing that they had learned some basic skills necessary for life that would have better prepared them for the “real world” — particularly in terms of money management and financial responsibility. With the start of 2023 underway, this is the perfect time not only to resolve to be wiser with spending but also to set a positive example for younger generations.
There are plenty of opportunities for parents to teach their children about money and it’s beneficial to instill these values when they are young. Doing so will not only help develop an understanding early on, but it will also create positive habits that can last a lifetime.
A study conducted by T. Rowe Price indicated that almost 50 percent of parents miss opportunities to discuss money and finances with their kids, while approximately 25 percent expressed strong uncertainty in talking about financial topics with their children. However, these hesitations are not shared by roughly 50 percent of the children surveyed as it was found that they wish that their parents had provided more guidance and information regarding money.
There are a variety of ways that parents can support their children in forming valuable financial habits before they begin to manage their own bank accounts.
- Allow opportunities for kids to earn money — Rather than simply giving children an allowance, provide them with opportunities to earn money by taking care of chores such as taking out the trash, washing dishes, and cleaning their rooms or other areas of the house.
- Set a positive example — Kids learn a significant amount simply by watching the actions and habits of their parents. Be an example for your children by practicing responsible saving and avoiding impulse purchases.
- Teach them how to budget their money — When giving children money they’ve earned, remind them that it’s all of the money they will be receiving, and they must be smart in how they choose to spend it. This is also a good time to help explain the difference between needs and wants as well as share the importance that finances must often be used on expenses they are required to pay, not solely for those things they actually want.
- Educate them on saving and investing — Doing so will help kids better understand and learn the value of a dollar while also helping them prepare for their futures.
- Set a precedent of giving — Allows kids to donate to an organization or charity of choice so they can see how money can be used to help others in need.
It is never too early to instill knowledge about managing money and set positive financial habits. Doing so when children are young helps to ensure that these learned behaviors translate into responsible spending, saving and investing later in life.