A lot of us are waiting for the 31st of October as it is a momentous day. Yes, it’s Halloween! But did you know that it is also World Thrift Day? World Thrift Day is observed globally in an attempt to promote and encourage the importance of financial security. On this day, people are made aware of the importance of savings, economic growth, and management. A country depends on the financial decisions of its citizens. All the microtransactions finally come together to decide the way forward for the country’s economy. When people have a good grasp on finance and money, only then a country can truly prosper.
We often think that money is an “adult” thing, and kids don’t have to think much about it. Money is a vital part of life, and as a parent, you need to tell your children the importance of money and how to manage it so that, in the long run, they are better equipped with the idea of financial security. In today’s age of online payments and transactions, children also often are part of the financial ecosystem. That makes it all the more important that children have some basic sense of how money works. This World Thrift Day, we look into how you can talk finances with your child:
1. Always Keep It Age-Appropriate
Money is essential in every phase of one’s life, so the earlier your child knows about it, the better. Having said that, you can’t possibly talk about mutual funds and investments to a five-year-old, can you? They won’t understand the concept of it, and it’ll go right over their head. Instead, keep in mind your child’s age and talk about money in a way that they would understand. For example, start by introducing the concept of piggy banks. Get them a cute piggy bank, and tell them to save a tiny bit of their allowance or pocket money. Show them how to save this so that they can use it for something nice at the end of the year. Tell them the benefits of saving money and why it is essential to incorporate such a habit into their lives, even in the long run.
2. Don’t Instill A Negative Mindset About Money
A lot of people have financial woes, and if you’re struggling with money, be honest with your child, but don’t convey it negatively. When talking about your problems, always discuss a solution as well. Also, make it a point to tell your child that oftentimes financial problems are a result of many factors, and money in itself is not a bad thing; it is a necessity. Avoid using phrases such as “money is the root of all evil”. It’s not okay to downplay the importance of money, nor is it okay to tell your child that money is evil.
3. Present A Unified Front About Money
You will end up confusing your kid if your partner gives one opinion on money while you give the exact opposite. In fact, research goes on to suggest that students whose parents often argued and disagreed when it came to money matters were most likely to have the wrong judgment when it comes to managing money. These kids often grew up to have credit card debts or too many credit cards active at once (1). It’s important to present a unified front when it comes to money, so discuss with your partner what you wish to convey to your child. If you seem to have a disagreement with your partner about money, don’t squabble about it before your child; instead, talk about it in private.
4. Wants Versus Needs
It would be best if you taught your child the difference between wants and needs. There are fun ways to do this. For example, when you go to the supermarket with your child, tell them that they’ll have to get all the items they “need” first. Once this is taken care of, tell your child that they can now get one thing they “want”. Allow them to choose, but they have to stick to just one item from their list of “wants”. This helps them prioritize better and practice self-control.
The easier option would be to give in, but it isn’t going to help them understand the value of money. In fact, research conducted by Duke University concluded that giving in to your child’s demands, particularly at the grocery store, may lead to them being problematic and having self-control issues in the long run (2). So, make fruitful attempts to show your child that money is essential and there’s a fine line between wants and needs, so they can be financially healthier when they grow older.
5. Avoid Gender Wealth Gap
More often than not, fathers (and sometimes mothers) tend to talk about finances with their sons. They don’t speak as freely about money matters with their daughters. When you do this, you’ll have sons who are confident and aware of money, savings, and financial growth. But you will also have daughters who shy away from talks about money because they have been brought up to believe that they don’t have a say in financial matters and it doesn’t concern them. Play a role in reducing the gender gap in wealth instead of contributing to it. Girls, as well as boys, need to be equally educated in matters of personal finance, and any thought that discriminates among them is plain stupid.
As a parent, you are the authority figure in your child’s life. Children are incredibly observant, and they tend to emulate what their parents do. You can tell them several things, but what stays the most is what they see. So, if you talk about saving money but end up spending carelessly without any limit, your child will turn out to do the same. So, it’s essential to practice what you preach, so your child follows in your footsteps. What are your thoughts on this? Let us know in the comments below!
- College Students and Credit Card Use: The Role of Parents, Work Experience, Financial Knowledge, and Credit Card Attitudes
- A gradient of childhood self-control predicts health, wealth, and public safety