As parents, we know how crucial a solid notion of personal finance is for overall life success. That’s why it is so surprising that our children do not learn any of it in school and it’s up to us to do the teaching. They will thank you for life!
Teaching your child financial skills is crucial and should start as young as three years old, according to Neale Godfrey, author of “Money Doesn’t Grow on Trees: A Parent’s Guide to Raising Financially Responsible Children.” It’s at this age that they can begin to build an understanding of an allowance , so it’s a great time to learn budgeting and saving too with your help. It’s not only important to teach them the value of money and earning it but also knowing how to spend it slowly and wisely and controlling cash flow.
Here, we’ve shared some top tips on how to teach your children financial management fundamental basics:
Tip 1: Teach Delayed Gratification
The most important concept to keep in mind is “delayed gratification”. This is a fundamental skill that children must learn from their parents. Countless studies, such as the Stanford Marshmallow Experiment, have demonstrated that delayed gratification is one of the more crucial skills a person can learn for life success. Explaining to your child the concept of an allowance is principally about giving them the first-hand experience that once their hard work is done each week, they will receive a fixed amount and that over time this will allow them to buy what they want. This is key in teaching them the value of money, the concept of saving and delayed gratification.
Tip 2: Help them Understand the Concept of Budgeting
The next important skill to teach your child is budgeting. Learning that we all have a fixed amount that must be spent on certain things, such as food, housing and clothing, is vital. A great way to do this is to take your child shopping and show them that buying the ingredients to make a meal should stay within a price range. They will also learn through this exercise that special deals and price reductions can help save money on everything from food and home or personal products to clothing and tech items (like phones), which will be incredibly useful, especially as young adults when budgeting is usually a requirement. More information can be found in The Telegraph, which highlights teaching your teens how to make sensible financial decisions as they grow older, and lays out its top tips.
Tip 3: Adjust Budgeting Skills to Age
Your teens will have different money expectations than your toddler as you know. So, you need to adjust your teaching of new skills. You may wish to start them with an Excel sheet and helping them write their incoming income, how to increase their income, and laying out their expenses. Teach them to keep a percentage of their money for savings and an important part for “investment” (see below). Around the age of 15, you can set up a bank account for them and teach them the difference between a current and savings account, what interest means, and how to not use a credit card (and avoid debt). They will also need to understand and debate the reasons and causes behind taxes, what percentage contributions working people pay, and the value of investing and saving for retirement.
Tip 4: Teach Investment with Returns
One great way to invest in their future is to make sure they learn how to spend money in skills they are “investing” in. As a mentoring and tutoring service, we hear countless testimonials about how students from 6 years old to university age have benefited from personal tutoring, language courses, and university application advising. In today’s competitive and hard working age, young people need to learn to save for skills and services that help them thrive beyond what they learn in school – whether that’s a course in Mandarin or private tutoring in maths and essay writing.
We know how important it is for your child to get help, build confidence and gain knowledge. If you’d like our help to teach your child financial skills, give us a call and ask how we can organise a bespoke programme for your little one and their friends!
Contact us today at email@example.com or 02030867311 for any questions about how we can help your child develop academically or to set up your free consultation and get matched with a tutor who will help your child master lifelong skills.