TELLING your children you don’t have enough money to buy them the latest mobile phone, tablet computer, or that you cannot afford a holiday this or next year, can lead to shame as well as extreme stress throughout your family. So how do you teach them about money?
There are many families who have to conduct the same discussion when it comes to buying food for the table. While some can afford the best steak, others haven’t seen quality meat in years.
Getting past the fear of discussing financial matters with family members can be extremely difficult and in many situations, almost impossible. At what age can you relay information about your income and expenses and expect them to understand it responsibly?
Materialism has instilled a sense that children judge the amount you love them by the amount you physically buy them. They are good at holding parents and guardians at ransom until they receive that latest must have. They will, at a moment’s notice, critique the funds you make available to them.
While each family has its own methods and understanding of what may or should be discussed, down to the characters of the people involved, it is important to discuss the financial framework of your family openly. When you set these boundaries you are teaching them to plan and prioritise how to spend money and explain why it is crucial to encourage those plans to work.
Parents who have been successful in this area of discussion and shared financial details with their children started by setting definitive roles for their children’s allowances. They will agree what it can be used for and circumstances where it cannot be used. This develops their sense of responsibility and independence.
Over time, these plans also incentivise the children to save and invest wisely. They quickly learn that overspending in one area means they will fall short in another. This may mean, in the simplest terms, that the student may not allocate money for one area of their life when another calls for funds. They may have to go without snacks and sugar drinks to top up their mobile phone.
The concept of talking about money may be introduced as soon as the child is able to understand the logic behind the planning. More experience will be gained if the learning is hands-on, while closely managed by their family teachers. In the very early stages, money can be given to children to go and buy simple snack foods. On return, the change will be checked and the process discussed. This same process doesn’t really change when bigger items and larger sums of money are involved, except within the concept of earning the money and receiving a regular allowance.
Learning how to budget will introduce the concept of choosing which items are essential and which are just nice to have. They help children make choices and learn from any mistakes, so the next choices become better informed.
Where children are taught to save a certain percentage of money given to them through an allowance or gift, they will also learn how to think long term and understand durable planning as well as short term budgeting.