Many people only worry about how to make money, a little about how to spend it, and less about how to manage it. More only worry about how to spend money especially when they have a lean income stream.
Money management involves knowing how to judiciously spend your hard-earned money. Everyone who spends money including the kids should learn how to manage it. Smart parents raise smart kids and teach them how to be financially smart.
Financial smartness is a culture every parent should inculcate in their children early enough to prepare them to become responsible adults. Your child’s financial education should begin as early as age seven, research shows that money habits and attitudes are formed at this age.
You wouldn’t have taught your child any lesson that would impact life if you have not taught about money. Money is central to every aspect of life, the food we eat, the places we live, the clothes we wear, virtually everything revolves around money.
Without a good knowledge of money, it is practically impossible to do well in life. Wrong knowledge of money can result in mismanagement and failure in life.
A report by Statistica.com shows that the majority of bankruptcy cases filed by individuals and spouses are not business-related. This means those cases arose from mismanagement of money which resulted in an inability to pay personal debts.
Otherwise known as personal bankruptcy, it is the last resort for consumers in financial distress which allows them to have a fresh start. This condition grew in recent times with the rate increasing from 2005 due to the recession.
Financial smartness is a major culture we all should adopt and pass on to our kids. As the Bible said, “Teach a child the way he should go when he grows, he will not depart from it.”
We can avoid future rises in personal bankruptcy rates if we teach our children to be financially smart. Teaching kids how to be financially smart involves exposing them to all the available tools and ways to manage money. These tools should be able to help parents supervise their kids while they spend money.
How can I make my kids financially smart?
One of the good ways to make your kids financially smart is by exposing them to financial technology and enabling them to know smart ways of managing money.
Introduce Your Kids to the Use of Debit Cards
Debit cards are payment cards that deduct money from customers checking accounts when used for payment. They can be used for purchases both online and offline. Debit cards can also be used to withdraw money from Automated Teller Machines (ATM) or merchants who are ready to part with cash.
Get a debit card for kids managed by parents. This will enable you to keep a tab on how your kids spend money. You can send money to your kids anytime anywhere just by tapping a button. Using this method is seamless, no need to go to any ATM, no cash involved.
Greenlight Max is an all-in-one debit card for kids that teaches them financial management and investing principles. It uses real money, real stock, and lessons, to build your child’s financial intelligence.
A good debit card for kids will allow you to set parental control, and get notifications when your children spend money. Greenlight application allows parents and children to log in and have two different experiences. Parents have flexible control to monitor how their children spend money, the kids have access to check balances and learn how to manage money.
Learning to Save And Invest Can Make Them Financially Smart
Your child’s first knowledge about money is spending. When you have succeeded in controlling their spending through a monitored debit card the next step is to teach them how to save and the importance of savings. Teach them that money isn’t just made for spending, they should also save.
Learning to save is not just about being financially smart, it teaches discipline, goal setting, and planning. Savings builds security and independence. Let the money saved be turned into an investment.
There are several ways to help your kids learn how to save and invest, you can start them up by giving them a piggy bank or jar where they can deposit coins and cash, and continue to encourage them simply by guiding them to invest.
A good place to start investing the money saved by your child is the Motley Fool investment program. It helps millions of people invest better and attain financial freedom, once signed up, you will receive expert guidance from their advisors and you don’t need to waste all the time researching the market.
Teach Them How to Make Budgets to Help Them Plan Their Spending
The first way a child relates to money is by spending. If all your kids understand about money is spending, you can as well teach them how to spend it wisely. Planning before they spend is ideal.
Teaching them how to live on a budget, and introducing a little allowance for personal accessories, could be the right way to get them to plan before spending and manage funds better.
Kids could live on a spending spree without a budget, you can reduce all the I need this, I need that stuff by placing them on allowance. They will be able to know how much is coming in and plan their spending according to how much they are expecting.
Greenlight app is a very useful tool your kids can use to monitor their inflows and outflows and how much they can save from the monthly allowance. When your child is placed on a monthly allowance it is very possible he would learn to spend less so he wouldn’t run out of cash before the next allowance comes.
Living within a budget and learning how to save and manage money early in life will help your kids do well when they step into the real world.
Let Them Learn Through Your Financial Behavior
Kids learn more from what they see parents do than what they hear them say. Play out what you want your kids to learn in your behavior. Let them see you plan your spending, save money, and do every other thing that can lead to financial smartness.
Make them understand that spending money is not just all about buying things, they can as well use their money to get things done, like paying for a service and paying people to do things for them.
Spending money is a decision, allow them to make the decision for themselves but let them know there are repercussions for not making the wrong one.
Dan taught his son how to save money on shopping by making him browse through the internet for all the shops offering discounts on a particular item they want to buy and get the best offers before they go for the real shopping. This kind of attitude can make your kids become smart shoppers.
Teach Them How to Make Money
Having a working knowledge of money is a fast way to teach your kids the value of money. Kids like to have their own money, so you should teach them how to work for it.
Introducing an allowance system is good, a better way is to make them earn it. You should consider making your kids do certain chores to earn allowances. It is obvious everyone values the money they earn more than the money they receive. Kids should not be paid for doing normal household chores since they are expected to help around the house. If they desire to earn money while they are below employment age they should be able to complete certain tasks around the house, to earn money.
Joanna says her three kids under employment age get weekly allowances for completing certain tasks in the house. The amount they get depends on the type of task they complete; usually, it is always higher when the task is more tedious.
A smart way to also control the allowance paid to your kids is by opening a bank account. Your kids can grow to receive a salary and even negotiate a raise for doing more tedious house chores.
Let Your Kids Know Money Can Grow Through Investment
It is basic to teach your kids how to make and save money but If you want your kids to be financially smart, take a step further to introduce investment. Your kids can start learning how to invest from age 15 to 17 and graduate to practical at 18 or 20.
They will be elated to know their money can grow faster when invested. Enroll them in a personal finance class or get books on investment and teach them if you know about personal finance.
Sometimes kids desire expensive gifts for their birthdays, Christmas, and other festive periods, a smart way is to teach them how to invest their money instead of buying expensive gifts.
Kate made a deal with her son on his 21st birthday, he wanted a Rolex watch but she wanted him to invest. So, she offered to give him the worth of a Rolex watch if he would invest it, if not, he wouldn’t get any Rolex. He accepted because that was the only way he could get the money, but Kate didn’t hand over any cash, she took him to her banker who put him through an investment package.
Now, Kate’s son prefers investing his money instead of spending it on a shopping spree because he has been earning interest on his investment and his money is growing.
Your kids may not necessarily get to your banker to learn how to save there are several other ways to do it, utilizing the use of technology.
Acorn is a micro-investing app that helps people save and invest money. You can make an initial deposit and contribute a specific amount daily, weekly, monthly, or annually for several years and you will earn a 6% interest on the total amount at the end of every year. This type of app can help anyone start investing even without prior knowledge or experience. Children can have an investment account with this app, it also enables savings and budgeting, a real smart package for anyone to manage finance.
A Quick Takeaway
It is important to note that the first thing kids learn is what they see their parents or other adults around them do. You would be able to teach your children financial smartness if you have good personal financial management.