Parents should be passionate about imparting financial knowledge to children, especially in handling wealth. All family members should understand money matters sufficiently to ensure the succeeding generations benefit from the accumulated wealth and know how to protect it.
Based on Stafford Thorpe Tokyo Japan‘s review, you should educate the next generation as early as possible. Younger children may only sometimes understand the principles and theories of handling money, but the habits and teachings will help them later in life.
These strategies can grant your children a formidable advantage and prepare them for financial success at any stage of their development:
Preschool (0 to 7 years old)
Even at the tender ages of preschool and kindergarten, your children are already capable of basic numeracy and have likely observed your financial transactions. Therefore, there is always time to initiate their monetary education, even during leisurely shopping activities.
These are some of the age-appropriate financial education methods:
Utilize Transparent Savings Containers
Opt for clear jars instead of the classic piggy banks. This approach enables children to witness the growth of their savings visually. You instill a fundamental understanding by demonstrating the correlation between saving and financial growth.
Lead by Example
Children start to shape financial habits from 6 to 12 years old, influenced mainly by their environment. Exercise prudent spending and harmonious discussions with your spouse to improve your children’s financial know-how.
Introduce Real-Life Financial Interactions
Beyond mere verbal explanations, children need to experience financial concepts in action. Experience is the best teacher, after all. You can encourage them to bring a portion of their savings and transact with the cashier personally. This practical experience enhances comprehension beyond theoretical lessons.
Preteens (8 to 12 years old)
Stafford Thorpe Tokyo Japan’s review reveals that children in the elementary and tween stages possess a more advanced understanding of financial dynamics, such as spending, saving, and giving. They already know how to do the basic math computations involved in dealing with money.
These are some of the financial concepts they can appreciate before their teenage years:
Define Opportunity Cost
Introduce the concept of opportunity cost, clarifying that the decision to buy one item comes at the expense of another. This lesson empowers them to evaluate choices and anticipate outcomes to decide if the money they lose in the purchase is worth the object they gain.
Teach the Value of Work
Promote the idea of earning money through completing household chores. Giving allowance for tasks such as taking out the trash, tidying their room, or tending to the lawn reinforces the principle that they can earn money through effort.
Limit Impulse Purchases
When your children request impulse purchases, you can teach them to use their hard-earned money to fund these desires. Additionally, impose a waiting period of at least a day for any expenditure exceeding $15. This waiting period cultivates financial prudence and frugality.
Emphasize the Virtue of Giving
Teach your children the significance of generosity by allowing them to select a church, charity, or individual in need of support. This trait aids others and nurtures a sense of altruism within your children.
Teens (13 to 18 years old)
They should have a solid foundation in financial basics by their teenage years. It is the best time to instill greater responsibility and encourage income-generation and forward-thinking financial practices to train for their eventual adulthood.
These are some of the principles that would prepare them for their financial responsibilities as grown-ups:
Cultivate Contentment
In a world inundated with social media and constant comparisons, educate your teenagers on the importance of contentment. Emphasize that material possessions do not define their worth and that experiences can be meaningful without straining your finances.
Introduce to Banking
Establishing a savings account for your teenagers is an excellent way to cultivate their financial acumen, equipping them with the tools they need for greater financial responsibilities. You can supervise their finances closely or grant them more autonomy to help promote accountability.
Create a College Fund
College is an integral part of your children’s educational journey. Encourage your teenagers to commence saving for their future education. This feat can be achieved through a portion of their income from part-time jobs during the summer or other periods.
Avoid Student Loans
Many people are in debt due to student loans and other educational credit schemes. Engage candidly with your teenagers about financing their college education without using student loans. Explore alternatives like community college, in-state universities, part-time work, and scholarship applications.
Beware of Credit Cards
Credit cards help build credit scores but could also become a trap for those without proper discipline and understanding. When your child turns 18, they will receive numerous credit card offers. Prioritize educating them about the perils of debt and the prudent use of credit cards to prevent financial pitfalls.
Train to Budget
The benefit of being raised in the 21st century is the emergence of smartphones and money apps. Familiarize your teenagers with budgeting principles using simple budgeting apps. This practice instills the importance of planning and managing their finances under your guidance.
First, you can assign their personal budget. Over time, you can hand over the household budgeting duties to them.
Encourage Entrepreneurship
Empower your teenagers to explore job opportunities or consider entrepreneurial ventures during their free time, such as school breaks. Starting a small business or working part-time is a valuable lesson in financial self-sufficiency.
Teach the Concept of Compounding Growth
Expose your teenagers to compound growth and investments to position them advantageously as they navigate their professional lives.
Normalize Family Financial Conversations
According to Stafford Thorpe Tokyo Japan, normalizing family-led money talk is the best way to set future generations up for success. Your children can ask questions and understand financial principles with your guidance in the comfort of your homes.
Aside from that, the parents and grandparents will expand their understanding of the fundamentals as they teach and read more about them. Everyone learns to cooperate and improve their financial habits, which helps secure the family’s wealth for future generations.