8 Ways to Teach Your Kids To Be Financially Independent
By Fazreen Razeek
It’s important at an early age to teach your child the value of money. Parents are the biggest influencers in their children’s financial habits. You need to be good examples to your kids and teach them essential money skills that will help them become financially independent.
Here are some of the most important things to tell your kids according to personal finance experts.
1. 24-Hour Rule
Before you purchase anything, always apply the 24-hour rule. After a day of thinking about it, you will come to see that it’s not something special. You can wait for something that you really love.
2. No Today, Yes Tomorrow
Sit down with your kids and tell them the value of financial responsibility. Try to make it a part of your daily life. If your child wants to buy something today, you can tell them no and explain why it will cost you a lot of money. Then, tell them that he has to save up for the trip so you will have a lot of fun.
Teaching the principle of delayed gratification and the lesson that sometimes you have to say ‘no’ to things you want now, to enjoy better things in the future is important.
3. Work is rewarding
Every time your kids want something (like a toy or a box of chocolates), ask them to work for it. For example, you can tell them they can have the gadget they like if they study hard to get good grades in school, they can get it.
Your child will begin to understand that hard work is rewarded. Try to pass on this trait and you’ll see how it will make a difference.
4. Spending Mistakes
Everyone makes mistakes, even you. Let your kids learn from their spending mistakes. Give them opportunities to earn money by doing chores and projects.
The best way to do this is if a child sees something they want and asks if we can buy it, I always respond, ‘Do you have enough money for it?’ Let them make $3 mistakes when they are little to prevent some $3,000 and $30,000 mistakes in the future.
5. Saving, Spending, and Giving
Teach your kids the true value of money and how it is a tool to be used for different purposes. You can use money jars each with purpose. For example, allow one day for giving, one for saving, and one for spending. On the last day of the week he can choose which jar to put his money in. He can never buy anything unless he has the money available in the spending jar.
This way, your child will see the importance of saving for the future, and the joy of giving to others.
It is also important to teach your kids at an early age how to manage debt. If they want to buy a toy, remind them that they always have 3 choices – buy it now, save to buy it later, or borrow from his parents.
If they opt to borrow, offer some payment terms and interest just like a regular loan. They need to learn the consequences of debt, both good and bad, to have the skills and experience to make smarter choices once they’re out on their own.
7. Wants vs Needs
It’s normal to spend and it’s necessary to survive. However, it’s the ‘wants’ that can get people in trouble. When your kids want to buy a non-essential item, always reply with two steps. First, wait a week, if you still want it, get it. Second, if after the week passes, you have to work around the house to pay for it.
If they’re willing to work just to buy the thing they want most, it means they’re serious about the purchase.
8. Price & Path
You can tell your kids that money can be used for other things right now, instead of saying “we can’t afford it.”
You can instead, help your kids earn the money to buy it herself. You can give them odd jobs to do around the house to earn the money. It was a great lesson in money math, delayed gratification, and the power of saving.
About the Author
Fazreen Razeek from Edarabia.com has served the education industry for over 5 years. He collaborates and works alongside education-marketing agencies, event organizers, and educational Institutions ranging from nurseries, schools, and universities to develop and execute their marketing strategies. He is extremely passionate about education technology and also writes for various local and international publications. A graduate with High Distinction from the Edith Cowan University, Perth, Australia, Fazreen holds a Bachelor’s Degree with a double major in Marketing & Management.