Even though money is such a huge part of the adult world, it’s often up to parents to teach kids what (little) they know about money, how it works and how to make it. But don’t panic! Giving your kid a solid grounding of financial knowledge and igniting that entrepreneurial spark isn’t actually that difficult; just good habits repeated over a lifetime, taught when they are young enough to not answer back:)
Who knows, you might just have a budding Steve Jobs or Warren Buffet on your hands, if you take note of the following:
Give Them an Allowance
Allowances are a contentious issue with many parents and money experts – some argue that allowances should be linked to chores the child does, others say that children should do chores regardless of payment as a part of the family. Whatever you decide to base an allowance on (good grades at school perhaps?) is very much your decision, but be sure that they get one – this introduces the concept of working for money early on in your child’s life, and helps them realise that grown-ups aren’t magical money vending machines.
Teach Them to Budget
Teaching your child to separate their money for different purposes is an important lesson; a lesson that many adults still haven’t learned. Kids don’t have regular expenses at a young age, so there’s only really 2 things they can do with their money – spend it or spend it. Teach them regularly put a percentage aside for a rainy day. The percentage that they decide to save isn’t hugely important at this point, what is important is that they stick to what they have decided to save.
Give Them Financial Goals
Setting a goal for your child could just be saving enough for a more expensive toy, or it could be reaching a certain dollar milestone, like $100 in the savings piggy bank. What it is isn’t really important; what’s important is teaching the concept of financial goals to your child. If your child doesn’t have any reason for saving, they likely won’t stick to the regime.
Cover the Basics of Investing
When your kids are a little older (say 12 and above) you should start to introduce the world of investing and entrepreneurism to them. Start with the absolute basics of why owning your own business or parts of other peoples businesses (shares) is an important part of getting ahead in life.
At this point you could give your child some financial “practice” with investing games like Cashflow For Kids and similar products that make the (somewhat dry) world of business/investing more interesting.
Teaching your child about money is more than the lessons you teach them – it’s also about the examples you set at home. With a solid grounding in the above and the right example set by their parents, your child should be in good stead for the future.