Helping your child learn money management skills at an early age can help them well into their future, and makes it more likely they will make smart financial decisions! Louise Sanghera from Zippy Finance explains how it’s done.
There comes a time in every parent’s life when they have to take a deep breath and sit down with their teenage son or daughter for a frank discussion about … yep, money. Getting a handle on how to be financially responsible is complex- especially for hormonal teens, who are constantly lusting after the latest clothes and gadgets and often driven by peer pressure. But teaching your kids about the importance of financial planning will hopefully help them make good choices and lead to fewer bailout loans from the Bank of Mum & Dad!
Achieve a ‘State of Independence’
There is no independence for a person in life without achieving financial independence! Many young people feel a desire to be in control of their own destiny (or at least a feeling of being in control – even if Mum and Dad are still their personal chef, cleaner and taxi driver!) You can respond to this feeling in your child and and help them take an important step on their path toward being self-sufficient by giving them full control of their own budget.
Do you remember the fable The Ant and the Grasshopper? In the story, the dizzy grasshopper larks about all summer while the ant diligently works to store food for the winter to come. When the seasons change, it’s the ant who is at the advantage over the unprepared grasshopper. For youngsters, budgeting provides a similar lesson in the virtues of hard work and planning for the future. Help your child to set financial goals (such as saving for a bike or a new game) and then put in place steps to achieve those goals. Being able to save, plan and budget in this way is a vital skill, one crucial to happiness in every aspect of life.
Encourage a sense of worth
There is no better way for a person to learn about the true value of money than by spending his or her own hard-earned cash! Encouraging your child to save for important purchases (or non-essentials) will mean they have a far greater appreciation of their possessions, plus they will get a boost to their own self-worth as they are trusted to control their own finances and make their own decisions about how to spend their money. Allocating money to specific targets is a great lesson in avoiding unnecessary waste.The purchase of a new pair of expensive sneakers (for example) is far more meaningful when a child has saved for the object themselves, rather than if they magically appeared with the swipe of Mum or Dad’s plastic!
Teach them to resist temptation
By teaching kids about earning, budgeting and spending their own money, you are also teaching them to control their impulses. By learning to budget, a teenager learns about how to set personal barriers and how to manage, recognise and resist temptations offered by marketing, in-app purchases and advertising. Yes, that app that all their friends are playing on their phones is cool, and it’s only $10- but a teenager who has learned the value or money will more easily recognise that it’s $10 that they won’t have to spend on something else.
Budgeting 101! Set your kids on the road to better budgeting with these tips:
- Lead by example: Sit down and go through the family budget with your child, so they can see where the family funds are allocated. If they can see the true cost of running the household, it might just make them more appreciative of all your hard work (sorry, can’t promise this, but you never know your luck!).
- Make money management part of life: Once they’ve got their head around the family budget, let your child have a go at controlling it. Hand over the reins of the family shopping for a week, or (if you don’t feel up to risking eating takeaway pizza seven nights in a row!) how about starting small by allowing your child to plan for a family day out? Give them the money, and allow them to figure out how to spend it.
- Make them earn their keep: Ecourage your child to get a part-time job. Once they know they have a regular income, they will be able to budget and save for big-ticket items themselves. Earning money of your own brings a better awareness of its value, plus working can contributes to self-esteem, self-confidence and gives teenagers an understanding of expectations in the workforce.
- Go high-tech! Kids are more motivated to budget or manage money when it’s fun and interesting. If you can, encourage your child to explore the different and most effective ways they can save and plan online, for example by comparing different types of accounts, choosing money-saver apps or virtual piggybanks.