School break, free time, fun indoor and outdoor activities, all these signify the summer break. This period is quite unique because asides having lots of time, your children are likely to earn some money through allowances, gifts, and favors. Summer presents an opportunity to build the foundation for a lifetime of financial security by teaching your children good money habits. This is necessary because despite the importance of financial knowledge and skills, it’s a subject that is not tackled in schools.
How you manage your money has a direct effect on virtually every area of your life. Therefore, smart financial habits is one of the most important topics to teach your child. Properly managed, your money can provide financial freedom, security and overall peace of mind for your family.
Here are a few tips on how to teach your child about money this season.
- Open accounts for saving: Prioritizing saving over spending is a valuable life lesson, one that takes time to learn. Opening a savings account for your child is one of the smartest ways to introduce that concept at an early age. Money received on holidays, birthdays and from relatives and friends can be stocked here, where it benefits from accumulating interest that increases based on the amount of money in your child’s account.
- Save (with a goal): Even short-term goals can help your children understand the value of holding onto money a little longer. You can tie certain goals to their savings. For instance, buying a gift for their grandparents. They can purchase things knowing that the money came from the diligence of saving.
- Deciding What to Buy: Now that your child has money, he or she might probably be more interested in buying things than saving more. You need to guide him or her to see beyond on-the-spot purchases to a larger purchase that will involve purposeful savings. This can be an item like a bicycle, a video game or a new pair of shoes. Do allow for some impulsive buying, but make time to teach your child how to make a budget that divides earnings into “instant gratification” and “saving for bigger things” according to a percentage.
- Shopping for a Bargain: Irrespective of what your child decides on, treat the purchase as if you were buying a car. Take a day or several days during the break to go around to stores or websites and compare the price of the item with your child. If your child is a teen, let him or her conduct their own research as well. As soon as your child attains the savings goal, set a date and go shopping. Sticking to a budget can be hard, so celebrate your child’s achievement.
- Showing the way: Encouraging your child to save money creates a chance for them to learn smart financial habits. It’s also important to note that your child’s attitude about personal finance probably takes a cue from your own, so re-examine your own approach to money if it seems like you are not setting the right example for your child. Actions truly speak louder than words.