Essential Money Lessons Every Parent Should Teach to Their Kids
Parents have the responsibility of educating their children to become a well-rounded citizen. In many cases the financial aspect is not seriously considered. Research has shown that teaching children to be financially responsible helps them to make sound financial decisions later in life. Here are some financial lessons that parents will find useful when teaching their children about personal finance.
Opening a bank account
To help your children gain effective money management skills, you should open a bank account for them as early as possible. This will help open up a conversation on money and elicit excitement on money matters. It will also help develop a sense of responsibility and an understanding of the role that financial institutions play in our lives. It will also encourage the culture of savings as well as expose your child to avenues that they can use to manage their money effectively.
Opening an account may help in exposing your child to financial education but it might not teach them how to save smart. You’ll need to teach your kids that there are different channels that can be utilized and that each will have varied benefits. Children need to understand at an early age that there are avenues that will give them high returns whilst some have high risks. Such an education will also show them that their money can grow if they make wise decisions as well as remaining disciplined in their spending.
Along with saving, teaching children about budgeting helps in effective money management. Teaching your children how to budget helps them build essential skills to achieve financial security. The lesson should involve teaching the sources of money, our needs, which expenses need to be prioritised and those that can be postponed until the funds are available. You should encourage a respectful attitude on money sources as well as teaching them the importance of valuing it. This will inspire them to carry out their own budgets.
Teach the basics of investment
Your child needs to understand avenues that are available for investment, they need to understand that their money can be utilised and give them returns. They also, in language that they understand, need to be taught about investment risks. This will help develop interest in investment and also making prudent decisions in the future.
Teaching your children about money management is a lesson that helps children as they gain skills in financial matters but also makes it easy for parents as your children may not make irrational financial decisions that fall back on you.