Financial responsibility is something that you need to impart to your children. These things are not taught at school and learning to be financially independent will always start at home. You cannot rely on the teachers and professors to teach your kids how to be independent financially.
Your kids will rely on you for help when they are not doing great financially. Although this is not a problem since it is your responsibility as a parent, you need to teach your children how they can handle their money wisely.
I already trained my kids on how to handle money for as early as 7 years old. When they are old enough to handle their own money, it is never too early to teach them. Here are a few tips that you can follow if you want to make sure that your kids would grow up knowing how to handle their money wisely.
1. Explain to Them that Having a Job is Not Enough
Your job is not enough to support you and this is the reality that a lot of working individuals found out too late. They only relied on what they are earning from their and they realized that they are not improving in terms of their financial capabilities.
You should tell your children that their job will never be enough to handle their finances. Even if they are employed in a good company, relying on their monthly salary won’t get them through.
It may be a direct contradiction of what you are doing, but it is not really a problem. If your children asked you why you are only relying on your daily job, just tell them that you made a mistake and you don’t want them to make the same mistakes.
Looking for business opportunities is always a good idea and combined with their monthly salary, they won’t have to face a lot of issues financially.
2. Teach Them to Observe their Spending
This is one of the simplest ways to teach your kids how to be financially independent. If you usually give them money when they go to school, you have to teach them how to budget their money and to observe their spending. Explain to them that spending all their money in one go or using it for things that they don’t need will only worsen their finances since they would have to find a way to make sure that the remaining money on their hands will last until the end of the week.
You should start by giving them their weekly allowance. You don’t need to worry since you are trying to teach them how to budget, you need to give them at least their weekly allowance. Here is a simple guide on how you can do it.
Tell them to list down all of the things that they usually buy at school. Make sure that they only write things that they really need like food, school supplies, and more.
Help them determine the amount that they spend every day. This would provide a clear idea of how much money they are using when they are at school.
Help them arrange their budget and remove the things from the list that they do not really need.
Explain why they have to start budgeting and the benefits that it can bring them. You can tell them that all of the money that they can save can be used to buy things that they want.
3. Teach Them About Thinking Long-Term Gains and not Short-Term Gratification
Like what is mentioned in tip number two, you can tell them to save money if they want to buy something that they want. By doing this, you are encouraging them to think of long-term gains instead of short-term gratification. Of course, as a parent, you need to buy them whatever they need, but if they want to buy toys or other things, you can tell them to save money so they can buy it themselves.
By encouraging them to save money, you are preparing them for all the financial troubles that they would face in the future. This will also be a good way to prevent them from being in debt just because they want to buy something.
You have to tell them that if they want to have something, they have to save money for it. This is something that they can carry until they become adults.
4. The Importance of Loans Management
When you need emergency money, It’s not a bad idea to apply for loans such as cash advances, but don’t let your kids rely on this option too much. Proper loan management is required if you want to make sure that you won’t have too much debt. It is never too early to explain about loans to your kids and why to choose them only when they are in a pinch financially.
You should tell them the benefits of using loans and the possible problems that they might experience if they failed to pay it on time. Tell your children that they should only get loans and cash advances as a last resort or if they are in an emergency situation and they don’t have money to use.
Everybody would get a loan one way or another so educating your children about loans early would help them understand how it works.
5. The Importance of Paying Bills on Time
Even though your kids are not paying anything right now, it is better to teach them the importance of paying their bills. You can take them with you when you are paying your credit card, Internet bills, and more.
You should explain why you are always paying your bills and why you have to pay it on time. Kids are very intelligent and they would easily understand what you are telling them. Just tell them that paying the bills on time would prevent any financial problems from happening in the future. It will also help them build their credit scores.
Just explain the benefits of paying bills on time and the things that they would face if they failed to pay their bills.
6. Open a Savings Account for Them
This tip is directly related to saving money since when you open a savings account, you are also saving money. Tell your kids that you would open a savings account for them and they should be the ones to put money on the account.
You should explain to them that opening a savings account will make sure that the money that they are saving won’t be accessed by anyone and it would also increase over time because of the interest. By explaining these things to your kids, they would understand that by putting their money on the bank, it would increase without doing anything.
Basically, kids will find it amazing that all they have to do is to put money in the bank and it would increase after several years. By putting more money into their savings account, they would also earn more money in the future.
7. Living within their Means
Extravagant spending is not a good idea and you have to tell your kids that even if they have a lot of money, they cannot spend everything. You should tell them that living within their means is the best way to be financially independent.
However, you cannot simply say one thing and do the other. You have to show them what it means to live within your capabilities. You should have a budget and always adhere to it no matter what you do. If you saved money for emergencies, then they should only be accessed during emergency situations.
If your kids see you spending too much every month, they would think that it is fine to spend a lot of money as long as you have it. The worst thing is that they might even spend more than what they currently have when they grow up. Make sure that you do it first, then teach them how it is done.
8. Tell Them About Successful Entrepreneurs
Nothing beats real-life stories when you are teaching your children and if they know that person, they would be amazed at how he managed to reach such heights. You should start with entrepreneurs that your children know.
You can tell them about Mark Zuckerberg, Bill Gates, Elon Musk, and more. This will be a driving force for your children to persevere and learn how to manage their finances. You should tell them how these people managed to become successful.
Well, all of them became successful because they know how to handle their money properly. At a young age, they are already financially independent and they can get through their financial issues without asking for help from others.
9. Don’t Teach Them How to Survive
When you teach your children how to survive with the money that they are earning, you are also encouraging them to stay where they are and never leave their comfort zones. Being financially independent means that they have to explore all the possibilities and opportunities given to them.
You have to teach them how to accumulate wealth instead of how to survive on what they are earning. Like what is said earlier, you should never stick with a monthly salary only. You have to find ways to earn money from the money that you are earning. You have to teach this to your children and let them explore and find what they want to do.
Don’t be afraid to teach your children everything about money. A lot of parents have been very strict about money matters and they don’t let their kids handle their own money while they are still young. It is not a bad idea, but you have to start teaching them early so it would become a part of their system.
All the things that your children learned when they are young will surely be carried when they become adults so by teaching them how to be financially independent, you are helping them set up a bright future.
Jim Hughes is a content marketer who has significant experience covering technology, finance, economics, and business topics for about 3 years. At the moment he works as content manager in OpenCashAdvance.com.