If you are a parent, you naturally want what is best for your kids. While you want to let your kids be free and explore the world in their own way, you should also remember the importance of keeping them educated on life essentials from as early an age as possible.
Basic financial literacy is an important part of this. If kids learn the fundamentals of managing money from an early age, it puts them on a course towards success that is guaranteed to work. Let’s take a closer look at some of the major elements of financial literacy.
Budgeting
Learning how to budget is absolutely essential in life. No matter how much or little money you have, it is critical that you understand where it goes on a monthly basis.
The basic principles of budgeting are simple, but putting them into practice and consistently monitoring activity are challenges. You should teach your kids the habit of monitoring categories of spending. Even when they are in their teens and spending allowances for the first time, teach them to keep track of how much they spend on which types of things. As they grow older, this habit can become more refined. They will thank you in the end.
Making Money And Investing
Obviously starting a career is something that will only come about later in life, but you can teach your kids about wealth from an early age. Include them in conversations about basic investment principles so that they will keep this idea in mind in the future.
While you’re at it, you can demonstrate your own ideas by choosing the right platforms for investment and using them sensibly. Some sites will even offer a trading calculator to help keep you on track.
Managing Debt
Managing debt can be one of the hardest things for people to handle, particularly in a society where consumerism is king. But this is one of the most critical things for kids to learn, even at a young age. If your kids see you spending constantly without thought and overhear conversations about your inability to pay the bills, they will start to absorb this mentality sooner than you think.
The best thing to do is lead by example and do your best to stay out of debt. If you do have debts from large payments, be diligent about eliminating them as soon as possible. And talk to your kids about the amount of money they can reasonably spend without going into the red. This even applies to the use of allowances.
Needs And Wants
A related subject is that of needs and wants. Or, as finance experts put it, “fixed” and “variable” expenses. You have fixed expenses every month that are basically out of your control: rent, basic necessities, etc. However, many other things fall into the category of adjustable expenditures. Streaming services (do you really need quite so many channels?), gym memberships (perhaps you can do without the luxury sauna), and even food items can all be adjusted to help balance your budget.
Your kids can similarly benefit from internalizing this concept at a young age. Of course, they should have nice things in life and be happy. However, illustrating how to distinguish between needs and wants at an early age will not only teach them to be more prudent in their spending habits but also make them value all the things that they have in life more.
Understanding Credit
Credit is a great invention and an excellent way to allow people to live a full life. It can also easily spiral out of control. Teaching your kids to manage credit cards responsibly is similar to teaching them about debt.
Before your child even gets their first credit card, you should instill in them the notion of paying in a timely manner. Illustrate how interest rates can spiral out of control if bills are not paid in a timely manner. Not having to pay upfront for purchases can easily cause people of all ages to become complacent and ignore their responsibilities. Take active measures to prevent this early on.
Act Now, Relax Later
All of these concepts are fairly simple in their basic form. However, it is building and maintaining lifelong habits that is challenging. Teaching kids about financial literacy can be both beneficial and fun if you go about it right. And when they are grown, you will have the pleasure of watching them pass on the same good habits to their own kids.