Many people, upon reaching their twilight years, will look back with regret at some of the choices they made in life. Remorseful memories of ‘youthful exuberance’ are often money-related; as the poor financial decisions that we made long ago have consequences that can negatively impact our fortunes forever.
Sometimes, I wish I could take a trip on a time machine so that I could change my past. One of the first things I would seek to rectify would be my imprudent actions regarding money. I would erase the careless spending and non-existent saving habits that characterised my early years, and replace them with sensible money practices.
If you’re like me, and you have a less-than-impressive history with money, don’t hold your breath waiting for that time machine to be invented! While we can still make smart decisions today that may eventually turn around our finances, life would have been definitely easier if we had learned and applied the right principles when we were young.
One of the most crucial lessons we can teach children is how to be smart with money. Whether you’re a parent, guardian, teacher or an adult involved with youth mentorship, you should play a part in training children to manage their financial affairs. Here are some simple strategies that can help you to accomplish this important money mission:
Demonstrate smart spending habits
Today’s children are very intuitive, and it’s not difficult for them to realise when adults are in financial difficulties. There’s a saying, ‘children live what they learn’, and it’s vital for you to be a good role model for managing money. Your money habits will not only determine your own financial well-being, but they will also set a good or bad example for your children to emulate.
As soon as they are old enough to understand money, involve your kids in the process of budgeting for the family. Explain that everyone has to prioritise how money is spent and show them a simple calculation of how you allocate funds to pay for your household expenses. Help them to create their own budgets to meet their spending needs.
Shopping time can present a great opportunity to teach children about making choices with money. Let them see how advertisements can tempt them to purchase things they really don’t need, and show them how a budget can keep them on track. At the supermarket, help them to compare prices taking into consideration the quality and quantity of different products.
Reinforce the link between working and earning
Thanks to modern conveniences, many children are accustomed to getting the finer things of life without having to struggle for them. Some parents, in their desire to give their offspring an easier life than they faced, work very hard to ensure that they can afford to supply their kids with all the latest toys and trinkets.
Although it’s admirable to want the best for your children, you could be unintentionally spoiling them by not allowing them to see the connection between personal effort and achievement. One way to counter this is to give them age-appropriate chores at home to help them understand that their work effort is required to help the household run smoothly.
You can also encourage them to think entrepreneurially by looking for ways to earn extra money. Whether it’s washing cars in the neighbourhood, babysitting, grooming animals or using their artistic abilities on the computer, show them how to fill people’s needs to make profit. Let them utilise their own creativity to earn some of the funds they wish to use for non-essential spending.
Encourage saving and goal-setting
Many people have gone financially astray by succumbing to consumer desires that scream ‘Why wait? Get it now!’ One of the ways that you can steer your child into becoming a fiscally responsible adult is to teach them the value of deferred gratification. This is simply the decision to put off pleasurable activities today in order to pursue a more important goal in the future.
Explain to children the importance of putting aside some of their money, instead of spending it all on items that have no lasting worth. Introduce the saving concept with a piggy bank for younger kids so that they can actually see their money growing over time. Then, open savings accounts at a bank, building society or credit union where their money can earn interest.
Make the connection between the act of saving and their ability to achieve their goals. Show them how to set savings targets for trips or items they would like to buy, and offer to match their savings total if they can reach their target in a specific time. As they get older, explain that they can attain goals such as a house, higher education and retirement with steady savings and investments.
I believe that we can actually change the financial future of our country by educating our young people to make the right money choices, so let’s make a firm commitment to the process of raising financially smart kids.
Copyright © 2012 Cherryl Hanson Simpson. No reproduction without written consent.
Originally published in The Daily Observer, March 8, 2012
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Cherryl is a money coach and business mentor, and founder of Financially S.M.A.R.T. Services. See more of her work at www.entrepreneursinjamaica.com and www.financiallysmart.org. Contact Cherryl