One cannot stress enough the importance of planning and making wise choices when it comes to spending money. For starters, a child should be encouraged to invest 10%, give 10%, save 10% and live from 70%.
Every child has a list of the things they want or need but the problem comes in setting priorities. From the list, a parent should help the child decide which wishes are urgent and important and the ones that can wait.
Ensure your child learns how to plan for the future. From their allowances, they should set aside 10% or more for spending later and for long term goals.
Let them save up for something they want but cannot afford at the moment and learn that it feels good to work towards a target and get requited in the end.
To motivate them more, make use of clear jars which allows them to see their savings grow. Older kids should also learn the importance of saving up for financial cushioning against emergencies.
Rewards of work
Children need to understand that one has to work for money. To help them grasp the correlation between work and pay, let them earn some money by doing extra chores. However parents should not give allowances for the basic household duties that a child is expected to perform without pay.
Learning how to wait in order to be able to buy something one wants is hard for people of all ages.
Kids need to understand that they cannot always have what they want when they want it and have to save up for a period of time in order to afford some items. Learning to wait plays a big role in helping them avoid credit card debts later on in life.
Living within ones means is an important lesson that kids need to learn. They should realise that debt is a real trap due to the high interest incurred. Instead of running into debts to buy something they need or want and later struggle to pay it up, they should learn to save up for the item.
Children should be taught the tricks of smart shopping such as comparing prices, bargaining and getting discounts. The best way to achieve this is by letting them tag along to the stores as you go for shopping. Teach them to shop for value instead of focusing on brands. Allow the kids to hold or keep any saving you make from bargain hunting so that they can see that it pays.
Immediately they start earning some allowance, kids should be taught the art of giving. They should learn that money is not only for buying things but can be used to help the less fortunate in the society. Allow them to pick who to help or what charity to support. With time they will see the impact of giving, not only to those being helped but to themselves as well.
In order to best achieve all these, the secret is to not help them out when they realise they have made a mistake. It is important for them to feel the pain of bad spending habits and regret some decisions which ensures that they never forget about them.
These little mistakes with their money serve as important lessons to avoid bigger mistakes later in life.
Above all, set a good example for your kids. The little eyes are always watching and learning from how you manage your money and how you deal with tough financial situations. Endeavour to be the person you want your kids to become in future.