1. Learn the value of money
There’s an old fashioned view that one of the best ways to teach your kids about the value of money is to make them earn it. Whilst it might be old fashioned, it has a lot of merit to it.
Whether it’s pocket money for simple chores for younger children or a part-time job for older children to save for their first car or the latest tech savvy gadget, as adults we learn very quickly that rarely do rewards come without effort. These principles learnt early can lay the foundation for future success.
There is also a lot to be said for the old axiom that we all appreciate far more the things we have had to work hard for compared to the things we’ve received “on a plate”.
This doesn’t mean not spoiling your kids from time to time or helping them financially along the way in life; but the concept of shared responsibility will go a long way towards having them learn the value of money.
2. Set goals and budgets
This is an old chestnut, but it never ceases to amaze me the number of people that don’t set financial goals and have a plan to achieve them.
Start simply when they’re young with “single goal” oriented budgets. Whether it’s saving pocket money for a new toy or a something more substantial in their teens, the lessons of saving and planning will certainly stand them in good stead when more complex goal setting and financial planning becomes important in their older years.
The key here is to “chunk down” any long term goal into a short term manageable and easily realisable goals, and if you have the capacity to help them reward them with a “boost” when they’re achieved. Long term goal setting for children rarely works.
3. Circumstances change
This can be one of the harder lessons to grasp and is really one for the older children nearing the end of their school life.
As adults we have to confront unexpected change throughout our lives. We might have a great plan to save for a new house or say a holiday and then we might find ourselves out of work or interest rates might rise meaning we have to delay our plans.
Learning to build in “what if’s” into our plans helps us with decision making. What if interest rates rise, will I still be able to afford the new mortgage?
For kids, it might be as simple as building in a buffer in a savings plan for a price hike on the thing they’re saving for.
4. The future seems a long time away; it’s not.
When you’re young, the future, settling down, perhaps having a family of your own seems a long way off. Most late teens are concerned with simply the next party on their social calendar.
There’s not a lot wrong with that of course. As many of the older readers will attest to, those years can be the time of your life and to be cherished without burdensome savings plans. But they will also say that time flies so fast that you will suddenly be looking backwards saying I wish I had saved or planned better a bit sooner.
Whilst there is plenty of time for saving and planning for the future at that age, there is no doubt that the sooner you put a financial plan in place and start saving towards it the better off you will be in the long run.
It doesn’t have to be substantial, but the discipline of saving and investing, even in a very limited way will make a huge change to your future as much from the attitudinal benefits it brings as the direct financial effects of the savings plan/investing itself.
5. Get advice from people you trust, but also trust your gut.
Again one for the older children, but I believe it is so important to be sure that your children understand the importance of getting great advice from a trustworthy source.
Uncle Ed may have some cracking stories, but does he have the expertise and knowledge to properly advise your children as they enter the real world.
The internet age has certainly made information so much more widely available to everyone which is a good thing of course. What it has also done has exacerbated misinformation.
There is simply no substitute for quality advice from someone who understands the rules, works in the field every day and can cut through the myriad of information out there to a arrive at a plan that suits.
Finally, a word of caution to impart on your kids; get them to trust their intuition. If someone is promising the world it’s very likely they can’t deliver it; that’s the time for a second independent opinion.
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