20th November is World Children’s Day, dedicated to improving children’s welfare. In an increasingly insecure world, parents can create a brighter future for their children by fostering healthy financial habits from an early age. We outline six basics of financial management that you should teach your children before they fly the nest.
World Children’s Day: creating a better financial future for our children
World Children’s Day on 20th November seems like the perfect time to reflect on how we can all create a better future for our children.
Here at Infinity, we believe that financial planning improves lives. As financial security becomes ever more difficult to achieve, teaching your child the financial basics from an early age seems prudent. You’ll give them important tools to draw on throughout their lives as they work towards financial independence.
But where do you start?
Take a look at our guide below on six essential financial planning basics to teach your child. You might even learn some useful lessons for yourself!
Six essential financial planning basics to teach your child
- The value of hard work
When children earn their own money, whether through chores, a part-time job, or entrepreneurial endeavours, they learn a crucial lesson in personal finance and responsibility. It provides them with first-hand experience in understanding the value of hard work, the concept of earning, and the relationship between effort and financial reward.
- The importance of budgeting
An early understanding of the concept of budgeting will foster financial literacy and give your child essential life skills. We all need to learn how to manage and prioritise our funds and to make spending versus saving decisions. One strategy many parents teach young children is spend, save, share.
- The why and how of saving
Encouraging your child to save up for something they really want will teach them about delayed gratification and equip them with an important skill to help them resist the constant onslaught of messages encouraging them to spend as they get older. Opening a savings account that accrues interest will give them an early introduction into how money can be made to work for us. Granted, it’s unlikely to make them a fortune in the bank, but the lesson learned could be integral to their future financial security.
- Distinguishing needs from wants
Children who learn to distinguish between needs and wants are more likely to develop responsible spending habits as adults. Discussing your family finances with your child in an age-appropriate way will help your child grasp the difference between essentials, such as securing accommodation, food, and clothing. and non-essentials, like the latest iPhone or yet another pair of $200 trainers. This skill is vital as it instills financial prudence and cultivates an understanding of priorities. Later down the line, it will enable your child to make informed and thoughtful choices when they start to manage their own money.
- Mindful electronic spending
As economies move towards being cashless, and payments are made at the touch of a button, the tangible qualities of paper money and coins are being lost. Unlike physical cash, electronic transactions lack the immediate visual impact and tactile experience, which might make it harder for children to grasp the concept of finite resources, leading to a disconnect between the actual value of money and the act of spending. As parents, we must actively educate our children about the implications of electronic spending, teaching them to be mindful of their financial decisions.
- How credit works
Credit is a fact of life for most of us in the modern world. As the cost of tertiary education has risen exponentially, many young people are forced into taking credit at a relatively early age. We must teach them how to manage it responsibly.
Understanding how credit works is a crucial financial skill that extends well beyond the realms of education expenses. As your child enters adulthood, they’ll encounter situations where credit becomes a tool for major life decisions, such as buying a home or a car. It’s imperative to educate them about the impact of credit on their financial well-being. Teach them to maintain a good credit score by paying bills on time, avoiding unnecessary debt, and being mindful of credit card usage. Emphasise the importance of responsible credit management, as it plays a pivotal role in shaping their financial future.
By teaching your child these six essential financial planning basics, you will be laying the groundwork for a lifetime of financial well-being. As parents we have a duty to foster a mindset of financial responsibility and preparedness to empower our children and ensure that the next generation approaches their finances with confidence and resilience.
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