Much has been written about the financial struggles of modern times. The current generation of millennials are especially known for feeling the pinch, having grown up in the shadow of the 2008 financial crisis and now witnessing a global struggle and potential recession in many areas due to the effects of international trade wars and the coronavirus pandemic. These events have made it even more important for each individual to learn the best practices for managing money – and pass on those lessons to subsequent generations. Here’s how you can begin teaching your kids about good financial management.
Give them some financial responsibility
One of the basic tenets of developing leadership is that you can best cultivate individuals to become leaders by delegating some responsibility; give them a task within their capabilities, along with freedom to oversee its execution. Sometimes they may fail, but failure provides a valuable opportunity to learn. This principle can be applied towards teaching financial literacy to your children. While every parent can (and should) teach their kids about the value of money and how to distinguish between wants and needs, you can take things a step further – give them an amount of money to spend or save at their discretion, or open a savings account in Wichita Falls for your teenager before they go to college. This puts them in a position to gain hands-on experience and make independent decisions, along with occasional mistakes – and learn from those long before the time comes when they move out and into a world of more costly consequences.
Develop sound financial habits
The slang term ‘adulting’ has become a popular catch-all word among younger generations, used to describe handling the responsibilities of an adult, especially financial ones. Yet by emphasizing the accomplishment of adult functions, anyone can risk losing sight of the essential underlying processes and habits. You don’t want to have your kid end up simply paying their monthly bills while living from paycheck to paycheck; teach them good habits by explaining basic tasks such as coming up with the monthly household budget. Walk them through your thought process on how much should be allocated to certain expenses, which items are prioritized and which purchases are the first to cut. With a better understanding of real-world costs, kids can properly value money and be effectively motivated to save and manage their finances.
Teach them about generating income
Learning to be more frugal and how to effectively allocate one’s resources is always a good thing, but it’s also just one part of the equation for financial stability. Exploring ways to generate income is just as important as learning how to manage expenses – and yet many children only have a vague idea of the different sources of revenue. They many know that students all plan for a career in order to earn wages, but as many fields shift to focus more on skills mastered rather than degrees completed, you may want to place a corresponding emphasis on continued learning. Even an introductory lesson on what it takes to start a business, or how to invest extra money into passive revenue streams, can help to broaden their perspective on the different sources of income and how they plan their future.
Every cloud has its silver lining, and as we all try to get through these difficult economic times, it’s critical to pass on these lessons so that our children will be better-prepared to achieve financial success.