How to Raise Financially Prudent Children

If you are looking to instill good habits in your children, you should start as early as possible. The values that are learnt in childhood become a part of the personality for the rest of lifetime. When it comes to the matters of money, a lot of people can be quite careless in spending it and get into trouble. There is no doubt that most financial havoc today is due to the extravagance and senseless expenditure rather than lack of resources in the world.
Considering these conditions, it is very important to have significant financial knowledge on how to not only earn good money but also manage it effectively. Here are some tips and techniques you can use to develop strong money management skills in your children. They include:
1. Fixed Amount for Pocket Money
One thing that helps in building money management skills in children naturally is by giving fixed amount to them. For example, prefer to give a specific pocket money to your children, rather than offering money whenever they need it. A fixed sum will help your kids in building budgets for their expenses by themselves & stick to it. This also shows them the reality of spending money in real life i.e. you never get money on as per your needs but manage your needs in a given budget, whether you earn through specific salary or business profits.
2. Open a Saving Account
You can also take your children to banks and let them get accustomed to the office environment, financial jargons and fund managers from the childhood. It will help them to easily understand everything they need to know when they grow older. There are many savers accounts for juniors and teens. You should get saving accounts open for your kids to instill saving habits from the childhood. The profit return rate will also increase their motivation to save more money in their account.
3. Chores for Extra Allowance
The best way to teach your children that “there is no free lunch” in this world is by putting them through struggle to achieve what they want. If they have already used their pocket money and are asking for more money, it shouldn’t come free. Instead, teach your children to earn for the extra funds by making them do chores for any extra allowance they need. This will make them value their hard earned money more.
4. Help Them Build Goals
To develop the habit of saving earlier in life, you should let your kids dream and make small goals! It is always good to buy them money boxes to save funds for any specific thing they want to buy. Generating a sum to get the thing they desire is always motivational for young kids.
5. Investment Plans
Other than the regular saving accounts for kids in various banks, you can also try out some investment plans. In fact, it is essential to help them invest some money that grows into a larger fund with time!
6. Responsible Spending
Being prudent or careful about spending money doesn’t mean that they shouldn’t have any fun in life. You should allow your kids to have as many new experiences as possible. It is ideal to divide various expenses in given percentages. To instill good values, you should also encourage your children to give in charity from the very early age. At least a 10% of their total budget should be dedicated for this purpose.
7. Reward for Savings
Positive reinforcement should be used to help develop certain skills you want in children. It is always good to reward them for their savings and achievements every once in a while to encourage them. If they want to buy a thing and have generated more than half of the funds, you can help with the rest to create a positive example for future. It will increase their motivation as they will receive rewards on their savings.
8. Practice What You Preach
Last but not the least, most kids don’t do what they are taught, but what they see. It is important to practice what you preach if you want to see the results. If you tell your children to save but you spend your money recklessly, there is a low chance they will actually be motivated. However, if you show them the importance of carefully managing money in your actions, they are more likely to learn it from your behavior.