Most kids won’t learn the basics of how to manage their cash at school, which means that it’s up to parents to provide their youngsters with the education that they need. If your children don’t know how to deal with money effectively, there’s a good chance that they’re more likely to end up with debt or spending problems.
Whilst educating your child about finances might seem like a daunting concept – particularly when you are struggling with sticking to your own budget, it’s important to make sure you help them get on the right path as early as possible. With that in mind, here are 7 things all kids should learn about money.
1.What Money Means
The first thing that kids need to know is what the “concept” of money is all about. Ideally, you’ll want to teach them about the relationship that they’re going to have with cash when they’re growing up from a very early age. For instance, tell them that money is a useful tool that makes it easier to get the things we need and want, but also inform them if they want to have money, they need to learn how to earn it, and use it properly.
2.How Credit Works
As your kids begin to learn about money, they’ll notice that you use cash to buy things. Eventually, they’ll probably also notice that you pay for some items with “plastic”, but they won’t understand how credit cards work unless you explain it to them. It’s important to tell your kids that credit cards aren’t simply a source of free money. This is the perfect time to introduce your youngster to the idea of “interest” and how it can build up over time. Sites like Readies.co.uk have a wealth of information regarding credit and how it works.
3.The Value of Working to Earn Money
From an early age, your children will quickly catch on that money is the way that they get the things they want. When they’re craving a new toy, they’ll see that you use money to get it for them in the store. However, they need to learn that money isn’t something that just gets handed to them throughout life. It’s important to introduce your youngster to the fact that money is something that they need to work for. This will make employment less of a shock.
4.The Importance of Saving
When kids start to get money for the first time, there’s a good chance they’re going to want to spend it. While there’s nothing wrong with that, you should be teaching them to spend the cash they have wisely. Sometimes this means taking time to prioritise their needs and think about what they want to buy first, and sometimes, it will mean knowing when they need to save up for a bigger purchase. Delayed gratification can be a difficult lesson to learn, but it’s something that will benefit your youngsters in the long-term.
5.The Benefits of Investing
As your kids begin to learn more about the importance of saving, they may begin to wish there was a way that they could be rewarded for their saving efforts. Around the age of 8 to 12, you could consider introducing the concept of “investing” into your child’s financial education. This is about showing your youngsters that the money they get can make them even more money if they use it wisely. Remember to discuss the fact that some investments come with a high level of risk and remind your child that they could lose money if they bet on the wrong horse (So to speak).
6.The Difference Between Wants and Needs
Often, it’s very difficult for children to tell the difference between something they need, and something they just want very badly. As your kids continue to grow up, it’s important to teach them what it means to simply want something.
Show them that clothes are a need, but designer shoes are something they “want”. At the same time, while food is a necessity, fast food and meals out at local restaurants is something that they “want” and can’t always have.
7.The Concept of Net Worth
Finally, when your kids are teenagers, you can begin to teach them about the concept of “net worth”. That’s the difference between the amount of money and assets they own, and what they owe. It’s important for your children to understand net worth so that they can keep an eye on their financial health as they get older.
For instance, as a parent you may view it as follows, whilst you might have £1000 in your bank account, it’s important to remember that you still owe £60,000 on your mortgage.