How to Instill Financial Confidence in Your Kids
When we are confident about our abilities, it provides us with the inspiration to achieve more, as well as to be more positive about life. Instilling financial confidence in children can help insure that they will be ready to manage their finances as adults, and make smart choices that will let their money work for them. They will be able to problem solve creatively, and perhaps best of all, pass along their financial wisdom to their own children.
- Go Beyond Allowance. Children doing chores in exchange for allowance is an age old process that most parents have instituted at some point. And, there is nothing wrong with rewarding children with money to incentivize their efforts. However, if it’s a strict give and take, then children may learn nothing toward being creative and doing tasks on their own. There is really nothing being done to propel their intrinsic motivation.
What should be established is the idea that children may be rewarded for work that goes above and beyond what is already expected of them. This creates an independent motivation that will foster young entrepreneurship and lead them to creative ideas not only on how to make money but also in helping people. One-way parents can reward their children when they go that extra mile is to provide them with gift cards that they can use at their favorite store, in addition to their traditional cash allowance. This helps them track their spending and learn financial independence.
- Let them “Fail.” Failure, of course, is just another word for ‘creating another opportunity to succeed.’ When you allow your kids to make their own financial decisions, they will quickly learn the difference between what it is they want and what it is they need. If they spend all of their money on candy and toys, and have none left for an item they need or wanted badly, help them reallocate funds from their next allowance and they will be more receptive to learning the lesson.
- Strive for Emotional Wellness. Social media wasn’t yet developed when most parents were growing up. These days, children and social media go hand in hand. While there is a tremendous upside to social media, such as connecting with friends and family, and the ability to express yourself creatively – there is also a downside. Most all of the social media platforms have been linked to depression, poor body image, loneliness, and anxiety. When you have a frank talk with your children about what to look out for – cyber bullying, aggressive marketing, and fake news, you’ll be able to teach them what to move toward and what to stay away from, thereby positively influencing their money spending habits now and into the future.
- Select Your Words Carefully. Words may be invisible but they can weigh a lot. The right words can uplift and motivate, they can help a child see the world with more clarity and objectivity. The wrong words can create confusion, shame, and lead to increased feelings of anxiety and detachment. If your child wants a toy but it is out of their (and your) price range, instead of saying that it’s too expensive, talk to them about how it might not be the best use of money right now, and point out the similar toys they have. Saying “too expensive” can cause the child to feel not worthy, and may invoke a sense of guilt in the future for wanting nice things.
- Let Your Child Pay. As young as is reasonable for your child to take on the small responsibility, let your child pay for things at the store. Instead of them watching you pay, hand them the money and let them go through the social situation themselves. This will help them become accustomed to the process, let them handle money, and get a firm grasp as to what happens during transactions.
- Teach Children About Banks. Let your child see how an ATM works, and talk about the fees and interest rates that banks charge. Research banks in the area to help determine where their money should be deposited, taking into account annual fees, minimum deposits and averages maintained, and any interest.
- Talk about Saving & Budgeting. Whatever age, if your child is receiving an allowance they are old enough to learn about saving and budgeting. Help them create purchasing goals for the future (saving up for the holidays and birthdays or a video game), and determine how long they will need to save to get to their goal. This will instill patience, a sense of gratitude, and delayed gratification.