Growing up as a child I don’t believe there was ever a time I became curious about money. I knew that if I needed something my parents had all the cash even though they warned me that they didn’t have a money tree out back. Coming from a family of five siblings my parents seemingly made ends meet and we rarely went without, despite being sent to private schools.
Some years ago I actually took the chance to ask my parents how they did it. How did we survive as a one income family putting food on the table and growing a happy healthy family? I learned of the struggle and hardship that my parents endured in giving us the best possible chance in life and realised that if I knew then about money what I know now I would probably be a wealthy person. It’s was very rare in the 70’s for parents to educate their children about money because in most cases they struggled with the idea as well.
Breaking the cycle
I didn’t really start paying attention to the idea of wealth until I was in my forties. After a string of broken relationships and a careless attitude toward spending I started to notice others around me who seemingly dug themselves out of debt and now live financially free lives. I began my studies toward freedom which of course led me to where I am today, sharing with you what I know.
Teaching your children to manage money at a young age will certainly pave the financial path toward wealth creation and financial freedom and by encouraging generational learning the future of your children, grandchildren etcetera will be preserved for generations to come.
Delayed gratification – Teaching children about patience, yeah right! Constantly talking to your children about ‘waiting’ is critical to their financial future in terms of saving for things rather than using credit and having money taken from them in the form of superannuation. When you give your child pocket money deduct a small amount and drop into a money tin for them to open when they reach a certain age (Superannuation). Every month add a small amount of your own which will constitute interest on their savings. Doing this will teach them about long term financial commitment.
Budgeting – Get them to write on a piece of paper each week what they believe they will spend their money on. Break it down into categories, there should be too many. Now ask them to also write down one item they wish to buy in the future (Not too expensive) that be more than their weekly allowance. Work with them commit to saving for that item using the budget. It may take a while but it is truly worth it.
Bad Interest – Children don’t quite understand the concept of credit (like some adults) and just see the new family car just appear in the driveway; the same with the new house and boat. Start with a simple spreadsheet, you can find free templates at Microsoft. Show them the consequences of buying something using credit or a loan and the interest that they will accrue over time. It’s important that they understand BAD Interest is not good if avoidable. Also discuss the concept of paying a home loan quicker by add additional funds.
Good interest – This is the fun one. Teach them about simple and compounding interest and discuss how the more money you have in the bank the more you will save.
So, these are just some of the interesting ways you can teach your children about money. It will be a little difficult in the beginning but I assure you, once they start getting the concept you won’t be able to stop them. Take care.