It has been proven through the years that parents are the biggest
influence on their children’s financial habits. To help your kids master essential money skills there is no better way than devoting time to financial home schooling, DebtWatchers book It Doesn’t Grow On Trees is a good resource for financial literacy and so is your daily financial behavior.
1. Delayed gratification
Involve your kids in family finances and try to talk in front of them about financial responsibility and independence. Avoid making money a taboo subject and explain to your kids how much and for how long you have saved to go on vacation. It’s a good way to teach him/her about the important principle of delayed gratification and the lesson that sometimes you have to say no to things you want now, to enjoy better things in the future.
2. Let Them Make Spending Mistakes
When you are out shopping, let them bring their own allowance money and spend it however they like. Not only do they learn money management skills, but it also gives them the chance to make money mistakes, for example purchasing cheap items that will break almost immediately, helps them make wise purchase decisions in the future and understand that quality has a price. They would much rather make $2 mistakes when they are kids than $20,000 mistakes down the road!!
3. Show Them That Work is rewarding
Make him/her work for pocket money to understand that hard work is rewarded. Having their own money will also give them a taste of financial independence.
4. Introduce the 24-Hour Rule
If you can’t make your mind immediately on buying something, go and think about it for 24 hours. If you realize that it wasn’t all that special, that you would rather wait and buy something you really like instead, show them why you acted like you did. Hopefully they will remember and invoke the 24 Hour Rule when they are older and have to make a more serious financial decision.
5. Make Them Work for Wants
A key factor in reaching financial independence is what you spend. Some spending is needed and necessary. However, the ‘wants’ can get people in trouble. Therefore, when our kids ask for a non-essential item, give them 5 days to think about it and if after the 5 days they still want it then it’s time to work for it by participating around the house to earn it. When they follow through with the required work they can be rewarded with getting what they want.