Teaching Children about Money Management from a Young Age

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Financial management is a skill that every adult should possess, as otherwise, the lack of financial management can bring about ruin and can cause a person to go bankrupt faster than you can imagine. Although that is an extreme scenario, such things have happened in the past and they’re not unlikely. That said, the best way to prevent such a scenario would most probably be to have knowledge about financial matters, preferably from a young age, as that is when children’s minds are the most flexible. Besides, habits die hard, these financial lessons will stick to them for life. So prepare them for the real world from a tender age.

Teaching Children about Money Management from a Young Age

Spending habits in different ages

  • Ages 3-5: At this age, it is important to teach your children that they can’t always get what they want immediately. Sometimes they just have to wait for them. So for instance, if they’re waiting in line for the swings, explain to them why it is important for them to wait. Set up 3 small boxes or jars labelled ‘savings’, ‘sharing’, and ‘spending’, and encourage your children to save up small amounts of money that they might get as birthday presents or for doing their chores.
  • Ages 6-10: This is when it is the parent’s job to teach their children about how money is finite and that they have to be smart about their purchases. Let them have a little financial authority as well, by giving them $2 while you’re shopping, for instance, and letting them decide what fruit to buy within the limitations of your needs. Also, involve them in more adult financial decisions and decide aloud about cheaper deals or alternatives while you’re shopping.
  • Ages 11-13: Teach them about compound interest, and about how much faster they’d be able to save if they start early. Shift their focus from short term goals to long term goals in this case, and be as clear as possible, using real numbers as examples.

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Teaching your children about handling their finances early on helps them immensely in life, as they will be able to have realistic expectations about how things may turn out and be able to set proper financial goals. Otherwise, they may or may not end up becoming careless and taking their finances for granted.

We have all seen or experienced in one way or another what poor financial management can do to a person. Whether you like to admit it or not, a good number of all those failed financial expeditions may just have been avoided had the person been trained early on to be able to set realistic expectations. That is why many fall into debt or bankruptcy as well. That said, sometimes even early planning and teaching cannot prepare one for a financial downfall, which is why it can’t always be blamed on the lack of preparation. Nonetheless, you should always be prepared before making major financial decisions. Check the latest broker rates here for more information.