As a parent or caregiver to a child, it is important to arm them with enough skills and information to be able to battle through life in a financially savvy manner. Gone are the days when you can bumble through, expecting a combination of fate and overdraft facilities to keep you afloat. In order to play the game successfully, it is important to have some knowledge of how to run your finances safely and how to protect your loved ones from financial disaster.
Pass on these important life lessons to your children and give them the means to have a financially stable future.
Budgeting is a skill that is imperative for children to understand. Whether it is budgeting a weekly amount of pocket money or budgeting their income from their first job, there is no excuse not to start teaching this vital skill at an early age. It is simple when the kids are young.
Start by playing shopping with them. Set up a supermarket in your living room and give them a budget to spend in your make-believe shop. As the children become older, their disposable income naturally increases and, as a financially wise parent, one of the financial facts of life (e.g. budgeting) becomes one of the best things you would have taught your offspring.
Prepare for the Future
Once the whole budgeting life lesson is underway, then another grown-up responsibility toward your children becomes apparent. Finding a life insurance policy that works for your your family is a part of looking after your family, especially if you want to offer them some protection against any possible future financial calamity.
Start by comparing different policies and thinking about what type of life insurance is the right one for you and your family. Be aware that any debts you have could be passed on to your nearest and dearest in the case of your unexpected demise. This might make you think about having a lump sum available in those circumstances, or, perhaps you want to focus on your mortgage being paid off in order to give your family some security. Not only is life insurance important for your family but teaching your kids about life insurance will be a very important lesson for them to learn. Teach them about the responsibility of having a family and how to protect them for the future. It’s a sobering thought, but if your children grow up with savvy financial knowledge, then they will minimise the chances of experiencing financial catastrophes as they make their way through life.
Another great way to get your kids thinking about money matters is to start them off with a system for saving. There are many options, depending on the age of the child and the amount that they would like to save. For instance, a very young child could be taught the positive aspects of savings by using a physical cue. Try a piggy bank or a clear jam jar, and when they have enough pennies in there, perhaps you can take your child to the ice cream parlour to take advantage of some of those savings.
The other thing to do is to break down finances into different outgoing compartments. This is a particularly useful lesson for the teenager who suddenly has a weekend job and gets their first taste of cash in the bank. By pointing out the need to split money into different directions to cover costs could save your angst-ridden teen from financial breakdown. By encouraging them to open several accounts, each one representing a different product, savings goal or direct debit, then the lesson of managing money becomes a little easier for the teenager who has just stepped into the world of the money.
Teaching children to save is not a big problem. They can see the pounds piling up in the piggy bank, and that is a great thing for motivation. But, how will that translate for the gap year student, hoping to see the world on a shoestring? Or, how will that help the teenager who is desperate to own her first car? This is where good parent points can be earned by agreeing to match the amount saved by them, thus decreasing the saving time by 50% and painting the parent as an all-around “good egg”.
So, by teaching children the benefits of saving money whilst they are still young, they will be able to use the lessons learned when they are older and have more revenue to manage.
By planting these financial seeds in their heads at a young age, you are certainly helping your child cope with the financial demands in life. It really all points to their future as a responsible adult—how to create finances to be used in the future and how to protect their own eventual family in the future.