How To Raise Financially Fit Kids

This entry was posted in Lifestyle and tagged .

How To Raise Financially Fit Kids

While kids get some basic money education in school, the real-life, everyday examples you can provide as a parent are really valuable.

You can show them how managing money and how juggling numbers can be fun. Fun is the key word here. Dealing with, and learning about money, should never be stressful for kids. As well as giving them a good grounding in money awareness, you’ll be taking away much of the fear that kids often have when it comes to maths.

You might even lead them into a lucrative career when that time comes, since qualified accountants and finance professionals are always in demand all over the world and an interest in numbers and money matters often starts in childhood.

Start them Saving

It’s never too soon to start meaningful saving. From very young, children enjoy saving pennies in a piggy bank.

As they grow, you could introduce them to the ‘three pot’ system, where they split up their savings into categories of things to save for. Label the pots ‘save’, ‘donate’ and ‘spend’.

Having a donate box encourages kids to think about sharing their wealth with others who need help. The ‘save’ pot is for money not to be touched, and the ‘spend’ pot is for dipping into for small treats.

Having a finite amount to spend introduces kids to budgeting, especially if they know you won’t top it up as soon as it’s spent. Make sure a reasonable amount goes into the ‘spend’ pot, and impress on them that once it’s gone, it’s gone until the next ‘pay day’.

Saving is also a good way to introduce the concept of interest. You could offer them a monthly interest on their savings, like a bank, then show them how to work out the percentages. They’ll soon learn that the more they save, the more ‘extra’ they’ll get. It’s a great incentive to keep them topping up the savings jar.

Also, explain compound interest to older kids, and make sure they understand that interest can work against them as well as for them, depending on whether they’re borrowing or saving. If you want your ‘bank’ to be ultra-realistic, you could charge them interest if they ask you to top up their savings pot when they’ve spent it all.

Get Them Earning

Parents often disagree on whether children should earn their pocket money, so it’s a personal thing whether you want to or not.

But allowing children to top up their regular allowance or pocket money can motivate them to save more as well as teaching them the value of money.

You could have a chore list posted on the fridge, filled with age-appropriate jobs that need doing. Give each task a monetary value, and let kids choose to work or not so there’s no pressure. They can claim a job, then cross it off when it’s done, keeping a tally of their earnings for when it’s pay day.

Another potentially fun way of letting them earn is to ask them to teach you something they’re good at, then pay them for the timed lesson at an agreed rate.

Teach Them Bookkeeping

Yes, really! Why not? It won’t work for kids too young to understand maths, but for those who’re old enough it’s a gentle and practical way to start learning accounting skills at a basic level.

All you need is a notebook where they can jot down their income and expenses. Older children might like having a spreadsheet on the computer.

Show them how to make four columns on the page, with headings of date, item, cost/income, and balance.

When they make money or spend it, they fill in the appropriate columns with what it was and how much, then keep a running total by adding or subtracting the cost/income from the balance. If you have a chores list to help them earn, they can jot down the jobs they’ve done to keep track of their earnings.

They can watch their savings grow on paper, be surprised at just how much they spend on snacks and drinks, and learn some really important lessons in money management at the same time.

Involve Them Daily

The instinct to protect kids is huge, and often this extends to protecting them from money matters within the family. It’s not a bad thing, but it’s not entirely good either.
So, clue them in on a few things, such as how much groceries cost for instance. Try playing a budget game, where you set a budget then ask them to choose ingredients for a family meal without going over. They could either do a pretend online shop without checking out, or in a physical supermarket.

When you take them to the shops, show them how to compare prices and figure out which are the good deals. Reveal some of the strategies retailers sometimes use to get us to buy, such as reducing size but keeping the price the same, or offering multibuy deals where buying separate items is actually cheaper.

It’s never too soon to start getting kids interested in and involved in money and financial decisions. Soon enough they’ll be exposed to all kinds of social and advertising pressure, so having a bit of money-savvy can save them from expensive mistakes as they grow into adults.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.