A lot of parents don’t like talking to their kids about money. They don’t want them worrying that they’re not going to be able to provide everything they need to keep them happy and healthy. However, if we wrap our kids in cotton, we are ensuring they grow up without an understanding of how the world really works. Here’s why and how we ought to have more money talks with our kids.
Most simply won’t grow up understanding it
The path to getting more financially literate for a lot of young people right now is a trial and error process. Mistakes, like getting too deep in an overdraft or using the credit card the wrong way, don’t seem like huge risks when they’re young. However, it can set people on the wrong kind of first step that can have them battling debt all through their life.
Teach them that trouble exists and that they can get their way out of it
That’s not to say that they’re never going to find themselves in debt or money trouble otherwise. But it’s also important that people don’t grow up thinking there are no ways out of a bad situation. Getting out of debt is an essential skill, one mastered by learning how to budget and how to find extra money when you need it. As well as setting them up not to fail, set them up so they know how to get over failure.
Get them in control of their habits
Failure isn’t always due to a poor understanding of finances. It can be down to bad spending habits, as well. When your kids are independent, make sure to share with them a few pearls of wisdom about how to avoid spending too much. One key lesson to teach is to avoid using the credit card to fund lifestyle choices, as well.
Get them started on their goals early
One way to get your kids thinking seriously about how to use their money is to tell them that they can become millionaires by the time they’re 65. By starting with daily savings of $2 when they’re 20 and scaling up, they can reach that goal. But the fact is they have to start early. The same goes for retirement and any other goals. The earlier they start, the better.
How do they reach those goals? By learning about gratification. Yes, they may want to spend what allowance they have earned now on a CD or some new clothes. But by delaying gratification, they could end up earning enough money to pay for a holiday themselves. Giving your kids goals like that help them understand that delayed gratification is the key to financial success and ending up with real wealth.
We all want our kids to have the best possible start in life and that means not letting out to sea without telling them which way to paddle. The sooner you start building your kids’ understanding of money, the better a chance they have.