According to a study conducted by the University of Illinois Urbana-Champaign, it showed that 36% of young adults between the ages of 18 to 24 were financially at risk. Why is this so? While there is no one set answer, many believe it is because they were not adequately prepared on how to manage money when they were younger. If you want to play a significant part in molding your children's sentiments, thoughts, and beliefs regarding money, the time to start is now. Keep reading to learn tips on how to teach your children to be financially responsible.
Communicate
According to studies, parents play the most crucial role in teaching their children about finances. You can begin while they are relatively little. Be completely upfront about money, especially your finances, and share what's suitable for their age as they grow. Down below are some communication and engagement tips you can use:
Engage your children in day-to-day comparative buying. Involve them in the discussion as you compare relative costs and values while shopping. Most importantly, share your opinions and seek their feedback.
Present the idea of having a budget. Show them the concept of trade-offs. For example, if you want to go on a large family trip, you may need to reduce spending, such as shopping for unnecessary items or going out to eat every night.
Teach your children about your past as a child. This can show them appreciation and thankfulness for the life and money they are enjoying today.
Clear communication is key to every situation in life, most notably when it comes to finances. Starting the dialogue about finances now allows your children to handle more complex ideas when they are older.
Teach Them
Allowing your children to make their own financial decisions will teach them financial responsibility, so allow them to utilize their own money. Here are some scenarios that could help you with your children:
Give your children an allowance. Should children be compensated for their chores? That is debatable, so why not implement a structure? Children can earn a base allowance and are required to perform basic activities such as cleaning their bedroom or assisting with a house cleanup. They can even earn extra money for completing additional duties like cleaning the attic.
Open a checking account for your child and show them the fundamentals about products at a bank. For example, tell them they can get better rates by getting a certificate of deposit, but they can not use it for a certain amount of time. If they want something more accessible, teach them about a savings account. It will have lower rates, but overall it would be easier to use for emergencies.
Do a competition with them! Tell them whatever they save by the time they are 18; you will also give them that exact amount. This should motivate your children to save their money and only use it for things they need.
Say NO!
It is critical that you are not allowing yourself to fulfill every request made by your kids. If you keep giving in purely to avoid the trouble, you may be causing more problems than you think. For example, giving in may impact potential choices by teaching children it's ok not to reject one of their own needs, and you are then increasing standards that they will not be able to maintain, later on. Teaching your children financial responsibility at a young age is doable but you must remember this learning journey will not always be easy, especially when you have to say no to things.
Be Open
It is critical to be clear about what the household can and cannot afford. When parents avoid having open and honest discussions about the family's financial position, their children form their own assumptions and conclusions, which may or may not be correct. It is also vital to address future costs with your children well before they become adults, so they can comprehend the price of things such as college, moving to another state, or starting a business.
Walk the Walk and Talk the Talk
If you can’t walk the walk, then don’t talk the talk. The best money advice to your children is useless if you do not lead by example. By acting as a good role model, you can teach your children the importance of financial responsibility. Your actions don’t have to be extreme; in fact, sometimes it’s as simple as paying your bills on time, keeping your expenses to a minimum, or putting your money away in savings. Always remember, what your children witness is likely to be repeated.
Schedule A Consultation with an Experienced Financial Advisor
Here at Fourth Avenue Financial, our first priority is your overall financial success. We want to help you develop, implement, and monitor a strategy designed to address your individual situation to ensure all your investments are setting you up for a path of financial success. If you are ready to start planning for your financial future, we are here to help. Contact us today at (304) 746 7977 to schedule a meeting with one of our experienced financial advisors or schedule online: https://calendly.com/fourthavenuefinancial/introductory-zoom.
Securities are offered through J.W. Cole Financial, Inc. (JWC) Member FINRA / SIPC. Advisory Services are offered through J.W. Cole Advisors, Inc. (JWCA). Fourth Avenue Financial and JWC/ JWCA are unaffiliated entities.