The Value of Money
The responsible financial habits that set young adults up for a successful future depend largely on understanding the value of money. Young people who understand that every dollar they spend means a little more time at work are likely to prioritise their financial resources to buy the things that make them truly happiest. Show your children that every dollar has to be earned - it can be as simple as linking pocket money to age-appropriate chores. In the event that society goes fully cashless, the banks have a good solution for handling pocket money - ASB Bank’s ‘Clever Kash’ makes it easy to keep track of pocket money via an app.
Teach Delayed Gratification
To get ahead in life, young people will inevitably find that they need to sacrifice some immediate pleasures to save up for the larger goal. Whether it’s buying a new car or a first home, the savings from sacrificing the little things can add up to more than the sum of their parts. The next time you head to the shops, make a deal with your kids: they can take a crisp $20 note today or they can ‘bank it’ and enjoy $30 in a month’s time. Although the return on investment is rarely that strong in real life, the deal is a great way to broach topics such as investing and Kiwisaver.
Savings and Budgeting
Although wealthier families are often able to give their children generous allowances, regularly endowing young people with enough money to buy whatever they want risks crippling their ability to make hard choices and to save. Teaching your child to systematically budget is one of the greatest financial gifts a parent can provide. Whether it’s a new skateboard or a video game, having your child plan out a budget sets the foundation for responsibly juggling competing financial priorities later in life.
As confusing as household expenses can be for many of us, bills and family finances can be absolutely mystifying for young children. Being transparent about family finances is a powerful way for parents and caregivers to help young people get to grips with the financial responsibilities that they’re likely to face when they move out of home.
Explain your rent or mortgage payments to your children and show them how you manage the monthly power bill - the aim is for your kids to appreciate that even things that are always present (like a house, electricity or the internet) need to be budgeted for. And consider rewarding your kids for lower household expenses - using some of the savings from lowering the power bill to pay for a pizza and movie night is a great way for kids to share in the benefits of keeping waste to a minimum.
Teach Your Kids About Credit
To some children, the idea of taking out a loan can be a scary concept. Other children may see a loan as a way to enjoy the rewards of spending now without any consideration for the future cost. These attitudes are of little consequence while your kids are still at school, but once they hit the real world it’s important that they’re mature when it comes to debt.
Make sure that your children understand that debt needs to be repaid, but also highlight that some debt can help make their goals happen. For example, a carefully planned out student loan can help your child increase their earning potential and come out far ahead in the long run. If you’re taking out a loan to renovate your house or buy a new car, help your children understand your goal and the tradeoffs involved in taking on debt.
Young people tend to model themselves on the adults in their lives, so a negative attitude towards money is likely to rub off on kids from an early age. If you’re constantly talking about money as a constraint in life, your kids are unlikely to see their finances as a positive part of their lives. Of course, this doesn’t mean you should raise your children to value money above all else - it’s all about appreciating money as something that enables us to live well and make our dreams come true.
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