Smart savers always understand the value of money. However, patience, due diligence and saving can often fall on deaf ears when the time comes to pass on investment lessons to your children.
Instilling strong saving habits early on can help set your kids up for the best possible chance of financial success in the future.
There’s a fine line between talking about money openly and teaching your kids about the value of currency. Have an open door policy when it comes to talking about money with your kids. Give your children the best possible chance to grow their personal wealth by illustrating lessons early on – here are a few suggestions.
Rewarding good savings behaviour
You can demonstrate how to manage a budget and save by giving your child a goal to work towards and reward individual saving efforts.
Using tokens in a jar as a physical indicator of progress can also work well. For example, if there is a significant purchase they have in mind, such as a school trip or expensive sports equipment, this is an excellent opportunity to create a budget that they have to stick to every week to reach this goal.
Like a bank, rewarding strong savings behavior can come in the form of subsidizing part of their goal or matching them dollar for dollar. Such efforts can intrinsically teach your child the value of saving, whilst also giving them a sense of achievement.
Set an example
If a child is a product of their environment, surely a parent’s own relationship with money is inclusive of this. It’s about modelling sensible and realistic spending habits. Resist splurging on unnecessary purchases too often, and understand that expensive doesn’t always mean superior. Being a good saver will set a valuable example to your children, and demonstrate to them that it can be done.
Being vocal of your own spending behaviours not only teaching children that saving is a lifelong habit that parents do too, but it normalizes sensible saving and spending behavior. For example, if you are saving for a family trip – demonstrate how you are making that happen, e.g. through cutting back on treat purchases when grocery shopping, through avoiding wardrobe purchases, foregoing special family outings. Practice what you preach – if your child is following your direction on making sacrifices, it is likely to have a higher success rate if they see you doing the same.
Money doesn’t grow on trees – really
Nowadays, we pay with cash less often, so kids really are learning the reality of expressions like “money doesn’t grow on trees!”. Yet, such phrases may not have the desired effect if it is intended to teach your children how expensive an item is.
Particularly in the digital age, it can be hard for children to know of an item’s true value if they do not have a physical exchange of cash when paying. Sit down with your children and teach them how much an item costs in comparison to another. For example, if they want to purchase a game app online, which costs $5 and they earn $10 a week, show them that this is half of their earnings. Furthermore, teach them what they could get if they saved for a month and earned $40.
Remember that while you will always want your children to feel that they can turn to you in times of need, you also want to give your children the ability to eventually step closer toward their financial goals on their own.
About the author: Ashley Playsted is the CEO of online mortgage brokering service, Wealthie. With nearly 30 years experience in finance as a banker and in senior management for some of Australia’s largest organisations, Ashley has created award-winning institutions including non- bank lender Mortgage National.