Financial literacy is the knowledge of how money works in the world. Teaching your children about money matters from a young age can ensure that they make responsible and informed financial decisions when they are older. Here are 5 important money lessons to give your children:
1. How Does A Bank Work
When children watch their parents withdraw money from the Automated Teller Machine (ATM) or exchange a cheque for cash at a bank, these scenarios alone may not be able to help them understand the value of money or see the hard work that goes into earning it. Debunk their misperceptions by explaining to them how money is earned through hard work and store in the bank for safekeeping.
2. How To Spend Wisely
The best way to teach children to spend wisely is by letting them manage their own pocket money. Every month, you can give your child a small amount of allowance which they can use to buy an item of their choice. If they run out of cash, refrain from giving more so that they will learn the consequences of overspending firsthand.
3. How To Create A Budget
Being able to divide your financial resources between different needs is an essential skill for the future. The next time you’re out grocery shopping or on a holiday trip, use the opportunity to teach your children about budgeting. For older children, you can work with them to create a list of things you will need to spend on, and give them a fixed amount of money to work with. This exercise teaches them to manage their priorities and develop an analytical mind.
4. How To Save
Whether it’s in a piggy bank or in the bank, saving a fixed amount of cash every month is important. The next time your child wants to buy a new toy, use the opportunity to teach them about saving. Ask them to put aside a certain amount of their pocket money every month until they have accumulated enough to purchase it. When you head to the store to finally make a purchase, allow your child to pay the cashier with the money they have saved up. Your child will never forget how good it feels to work towards a goal and then be rewarded at the end of it.
5. How To Earn Money
Once your children grows older, teach them the value of money by asking them to earn it rather than giving them pocket money. Show them how they can use their skills and effort to earn money. They could find part-time jobs at F&B establishments or retail stores or be an assistant at a clinic, school, office etc. Whatever they decide to do, they will treasure their money much more if they understand the hard work that goes behind earning it.
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