Many parents underestimate just how many things they have to teach a child. From the early basics of manners and potty training to more advanced things, such as having empathy and how to deal with hard life situations, the list goes on and on. That’s why many people neglect areas like financial training.
I know my parents rarely talked to me about money and money management. In fact, my own mother encouraged me to accept my college’s $40,000 loan offer, despite college costs being less than $7,000 a year. Thankfully I didn’t take the opportunity to waste that sum and graduated without any loan debt.
What else should parents be teaching their kids in regards to finances? Here are four lessons everyone needs to learn and pass on to their own children to get you started.
Give Every Dollar a Job
Kids need to learn that every dollar needs a purpose from early on. This can be taught when your children get an allowance and birthday money. A portion needs to go to savings, giving, and spending.
Say No to Impulse Buying
Saying “no” to kids when they want something in the store is hard, but it’s disastrous if a child gets used to impulsive buying. Instead, help children come up with a savings goal for a particular item. If they are saving $50 for a special toy, then they need to realize that $2 impulse buys on candy or junky toys will ultimately delay their saving goal and make them less happy.
Learn How to Comparison Shop
I am still amazed at the many people who don’t comparison shop. Teaching your child how to take the time to do the research will help their money go further. A new iPod might cost $250, but if they shop eBay or Amazon, they can get a refurbished model for half the price.
Along with comparing prices, teach kids to look up reviews on items. I’ve saved thousands of dollars in my lifetime just by reading reviews of a product before I bought it. It stinks to pay a lot of money for an item that doesn’t work like it is advertised. Taking time to search the product beforehand can prevent wasted dollars.
Learn How to Bounce Back from Mistakes
Even though you want to equip your child with financial wisdom, there is a good chance they will still make silly money mistakes. That is okay. It’s especially important for kids to make money mistakes now, when only a few dollars are at stake, rather than later when much more money is at risk.
If your child is insistent on buying that low-quality toy or wasting their savings at the arcade, then let them do it. Hopefully they will learn that spending money in this manner doesn’t make them as happy as they thought it would.
The best way to teach your kids to be financially-wise is to be an example for them. Don’t be afraid to talk to your children about your finances or about money mistakes you made when you were younger too. Your experience is extremely valuable, and not just to you.