As adults, it’s not always easy to make great financial decisions. Some of this comes from unforeseen circumstances we might face, some of it from unwise decisions or investments, and some of it stems from lack of experience. How many times have you thought about how differently you would have handled your finances if you had only known then what you know now?
These lessons that we learn over the course of our lives regarding our finances are ones that we can pass on to our children. Sure, we can’t expect that every bit of advice we give young people will be received with the utmost attention but, as all parents know, many of the lessons we teach will eventually stick. We can play a big part in shaping the base of knowledge and habits of our children. The more we can incorporate financial considerations into the lessons we give, the better equipped our children will be to handle their assets wisely.
Create a Habit of Saving Money
Consider how much money you would have tucked away if you had starting saving just a small amount of money when you were a kid. This is a habit that is tough for many Americans, but the earlier you can become disciplined at saving just a small portion of your earnings every week, the easier it will become.
Find Ways to Reduce Bills
Whether you’re turning off lights when they’re not being used to save on the power bill or you’re making sure you eat food in your refrigerator before it goes bad, you can trim your expenses by looking for the little ways to save that accumulate into bigger savings. Make it a game that you play with your kids to look for ways to reduce the electric, gas, water and food bills.
Retirement Saving Begins with Employment
As soon as the young person in your life starts their first job, they should also start thinking about saving for retirement. This isn’t the easiest lesson to teach a person who has their whole life in front of them, but it’s one that will pay off in a big way once they reach retirement age. Make sure your child knows about 401(k)’s and IRA plans. Knowing about retirement plans at an early age can mean not having to work well into your golden years.
Smart Shopping
Cultivate the instinct in your child to look for savings when shopping for clothes, food or any household products. Pay attention not only to the cost of the goods you’re buying, but also the ways in which you can incorporate sales and coupons into your shopping routine. Just like lowering monthly bills, this can be made into a game – one in which everyone wins.
Avoid Buying on Credit
Steering away from debt is a necessary and frequently over looked habit in all stages in life. When we are young, we can easily dig ourselves into a hole that we spend the rest of our lives getting out of. While some forms of debt, such as student loans or mortgages, will be an inevitable part of life for many of us, we can certainly decrease our reliance on credit cards when we make purchases. Teach your children that buying any luxury product should be done only with existing financial resources. Credit card debt can create a number of challenges for the young consumer, but it can be avoided by establishing the principle of buying only what you can already afford.
Teaching your kids about finances is very much about creating a mindset, a paradigm that will dictate spending and investment habits over the course of an entire lifetime. Arm your children with the instinct of looking for value and saving whenever possible. The earlier these habits can be established, the better off a person will be later on in life. Create rewards for children to make the learning process more incentive-based as opposed to penalty-based. Eventually, they’ll come to realize that the reward is actually the money they’re saving by being a more astute, budget-conscious consumer.