It is clear that financial intelligence is significantly lacking from our schools’ curriculums. If you’re a parent wishing to raise financially intelligent children, you’re going to need to take on the responsibility yourself.
Below are my 6 top tips to raise financially astute children, and start to develop the skills early that they will take through the rest of their adult lives.
1. Encourage independent decision making
While it can be important to have some rules with regard to what you allow your child to spend their money on, it’s also vital that you encourage them to make their own decisions. This will teach them a range of important financial lessons, particularly about buyer’s remorse and allow them to assess their spending and avoid repeating the same mistakes.
2. Don’t ‘top-up’ the pocket money
If you’re currently paying your child some form of weekly allowance or pocket money, avoid ‘topping up’ the coffers if they run out of money. This will teach them the importance of budgeting and the consequences of frivolous spending. Whether it’s candy, or a new handbag, these are valuable lessons that will benefit them throughout their lives.
3. Create job opportunities for them
Does your car need to be washed? Does the lawn need mowing? Offer your children the opportunity to earn more by completing extra jobs. This will teach them the importance of work ethic, and they may also start to learn that simply exchanging time for money may not be the smartest approach to generating wealth.
4. Lead by example
The old adage, ‘do as I say, not as I do’, is not going to lead to a positive result with your children if you’re not setting a positive example for them. Be sure that you’re doing what you’re telling them to do, and let them know. Our children learn from our behaviour and habits, whether it’s how we treat people or how we manage our finances.
5. Encourage them to give back
Many books and websites talk about the importance of splitting your child’s savings into ‘spending’ and ‘saving’ pots, to teach them of the importance of setting a budget and sticking to it. I would add a ‘giving back’ pot, to allow them to save a percentage of their pocket money to donate to a charity or cause that they feel is important. In addition to making the world a better place, this will teach them to recognise that not’s everyone’s as fortunate as them, and the importance of giving back.
6. Teach long-term savings and patience
With the onslaught of credit card marketing at every turn, impulse purchases has become a significant problem for many across the globe. Sit down with your child and start planning toward a long-term goal of theirs. Whether it’s a new video game, or lacrosse stick, make a plan together and set a target date for when they aim to purchase the item. By teaching them that you have to be patient and save to purchase the things you want, this will set the foundations for avoiding mountains of credit card debt and personal loans later in life.
With the right approach and strategies in place, your child will learn the right financial habits and you’ll be on track to setting the right foundations for their life.
To Your Financial Success!
Jarrad Brown is an Australian-trained and qualified Independent Fee-Based Financial Adviser with Australian Expatriate Group of Global Financial Consultants Pte Ltd providing specialist financial advice and portfolio management services to international and local professionals in Singapore.
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Jarrad Brown is an Authorised Representative of Global Financial Consultants Pte Ltd – No: 200305462G | MAS License No: FA100035-3
*Please note that Jarrad Brown is not a tax agent or accountant and none of the content outlined here should be taken as personal advice. You should consult your tax agent and financial adviser to review your current personal finances and financial goals to consider whether this strategy is appropriate for you.