Often, when individuals are asked what they would have loved to learn at an earlier age, money management and how to budget appropriately are at the top of the list. Lack of education on these topics can lead to financial struggles down the road, and limited exposure to solutions can leave individuals grasping at straws when problems arise. As a parent, you have the unique opportunity to set your children up for success in many areas, including their finances. Let’s check out some ways you can go about instilling healthy wealth habits in your kids.
Be an Example
From a very young age, children learn to repeat what they are told and to imitate behaviors they see in those around them. Being fiscally responsible is no exception. While children may not always have a firm understanding of the full weight of financial responsibility, encouraging them to be mindful of purchases and spending can set the foundation of healthy wealth habits in their future. Demonstrate to them how financial decisions are made and what considerations must be kept in mind when weighing the options or purchases and spending allocations. Be an example of how to set and stick to a budget, and be sure to share the benefits of doing such with them as well.
Have Conversations
Another way to instill healthy financial habits in your children is to have open conversations with them about the importance of managing money well. While you do not want to overwhelm them with the burden of your financial struggles, you can begin to give them a realistic insight into both long term and short term effects of haphazard spending and the rewards of being wise with your money. Discussing the reasons behind making certain decisions, and the thought process that goes into budgeting, saving, and spending, can all be extremely beneficial to raising a financially-secure family.
Outline Priorities
Sharing with your children how you set your priorities when it comes to finances can assist them with understanding the bigger picture and also with how to set their own monetary priorities, even if they do not have responsibilities such as bills or payments just yet. You can express to your children how bills are typically paid first, as they often include car payments, rent, and utilities, all of which may affect your quality of living if they are not paid. Next priority would be groceries and other necessary items for surviving and thriving. Only after enough money has been allocated for each of these items should anything be spent on leisurely activities or nonessential items. Talking your children through these priorities can assist them with future decision making in their own finances.
Let Them Practice
When it comes to just about anything in life, practice may not make perfect, but it certainly makes progress. Letting your children practice making decisions with money before their well being depends on it is a great way for them to expand their understanding about how finances work. Asking for their input when making choices at the grocery store and how to ensure you are staying within budget is one way to accomplish this. Another way is with an allowance that they are responsible for budgeting in order to afford things they would like to purchase. This practice is invaluable and will help them develop healthy wealth management habits for their future financial success.
If you are looking for ways to strategize your own wealth, or want to ensure that you are doing your best financially in order to set a good example, contact our team of wealth strategists today.