Financial intelligence is not something you can learn overnight. It is something you learn over time and through various experiences. This is why it has been repeated throughout time that children should be taught the importance of money even during their younger years. That way they will know how to better handle their finances during their adult life. Here are some tips on how you can boost your child’s financial EQ:
One of the most important things every parent must teach their child is to plan ahead. As early as when they are young, parents should include their children in their plans for the family, especially plans that involve finances. Should you wish to buy a new house or even a car, it would be good to get your child involved in the discussion. That way your child will have an idea about how finances work. This would also give your child a bird’s eye view on saving, which is necessary for big-ticket items. If you buying something expensive for the family or your child, it is important that you should let your child know of your plans. That way you can include your child in your planning. Make goals as a family so everyone will be well-involved with saving. Come up with an outline of the expected expenses. As a family unit, everyone should identify both their needs and wants. As their parent, you also need to include the basic necessities for their daily needs and other important payables, such as their school fees. From there, set a goal on how everyone, including the child, can cut costs on certain things to be able to make way for better budgeting to purchase that certain item.
Be a good role model
Your child will always want to emulate what you do. This is why you are the best model for proper financial management. This is why it is important that you reflect on your own values with regard to finances before teaching your child otherwise. One of the most important values you should impart to your child would be frugality. By getting your children more involved with your financial plans for the family, they will be taught to be more frugal. Moreover they will learn the value of patience as they would need to wait before getting something right away.
Require your child to save
One of the easiest ways to teach your child about finances would be through the act of saving. You can involve them in all your family plans. However they will not understand the concept of saving until you actually get them to start saving. For older children, you can start giving them an allowance. Every time you hand them their allowance, you must teach them to set aside 10% to 20% of their allowance for their savings. Their savings could be placed in a piggy bank or in an actual bank account. That way your child will actually see his money grow. It is still more advisable to open a bank account for your child as the money placed in a piggy bank can be easily touched from time to time. Just make sure that you show your child his passbook every time you make a deposit or take him with you every time you both make a deposit to his account.
Be transparent when it comes to finances
A lot of parents feel that talking about finances to children is unnecessary, especially if there are financial problems at home. They often feel that they is no use to discuss this with children as they cannot be of help in this matter and the child might get worried, since he cannot grasp much about the situation. However in order to teach your child about finances, you need to start young. Remember that dealing with finances is not all about saving money. It also includes problems and setbacks. This is something your child needs to be aware of. If your family is facing a financial crisis, it is good to let your child know that you do not have the budget for certain things. That way your child will also understand why you are unable to buy him toys and other things which were easily given to him before. But be careful when explaining your financial situation to your child. You do not have to explain the magnitude of the situation. But it will be good to impart to your child that saving would be helpful. Make sure that you explain to your child that this sort of situation is normal but temporary. That way your child will still feel secure.
By keeping your child well aware about the importance of finances and its relevance to saving, you will definitely be able to raise financial savvy children.
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2nd image by ddpavumba / FreeDigitalPhotos.net
3rd image by Pong / FreeDigitalPhotos.net