Be honest with yourself: how financially savvy were you as a child? There’s no shame in admitting that, like most of us, you grew up without a proper idea of key money terms and ideas. You knew what it was – everyone does – but you didn’t know anything about saving money or staying financially secure.
Sadly, it’s not something a lot of parents teach their kids, especially not back in the day. As a result, you didn’t know what to do when you got your first chunk of money. Whether it was from a part-time teenage job or a big chunk of money given to you by your parents, you didn’t know what to do other than spend the cash!
And so began many years of poor financial choices, possibly culminating in something serious like credit card debt. It happens to the best of us, and at least you have the excuse of not knowing anything about financial security. These days, there’s no excuse! We’re in a much better position to educate the younger generation and tell our kids all about key financial skills. There’s more accessible info out there for us to pass on to them, ensuring they don’t make our mistakes.
That being said, today’s blog will discuss financial security. First of all, what does it mean to be financially secure? We’ll explain this in just a moment before giving you some great financial security tips to teach your kids so they become more money-savvy!
What is Financial Security?
Experian, one of the world’s leading credit reporting agencies, explains that financial security is the ability to afford your expenses and live comfortably on your income. You also have money to save for the future, so you’re never in a place of financial despair. This doesn’t necessarily mean you’re “wealthy” or have a high income – it simply means you’re clever enough with your money to remain financially secure.
How do you achieve this state of being? It’s all about making smarter financial decisions and staying away from things that could cause harm. We’re about to go through some of the best ways to do this, and these tips will be excellent to teach your kids.
Introduce Your Kids to Saving
All kids should be taught how to save money. It’s something very few of us grew up with, which spawned the credit card debt generation. If you don’t grow up with the concept of how to save money, you won’t understand how to do it when you actually earn a decent wage. You’ll spend far too much, which makes it harder to pay bills, and you’re in a constant cycle of living paycheck to paycheck.
You don’t want your kids to go through this!
So, introduce your kids to saving from a young age. You should do this with their pocket money – or even using fake money from a playset. When they’re very young, you can show them the value of saving by helping them buy a new toy or game. Give them a little bit of pocket money every week, and then show them how saving some of the money will gradually help them avoid this new toy.
The pocket money alone won’t be enough, but they’ll see that not spending all of their money in one go helps afford things over time. It’s a simple exercise, but use a piggy bank or savings pot to visually demonstrate it over a few weeks. Within a month, they’ll see there’s enough money to buy their new toy!
Teach Your Kids How to Budget
Budgeting is essential for saving money. As an adult, you appreciate the value of a good budget, which tells you how much to set aside for various expenses. Making a budget is all about taking your earnings and then counting off your expenses. You’re then left with money to set aside in different savings accounts.
It’s a simple idea, but how do you teach this to kids?
Again, it’s something you can do while you teach them about saving money. Go back to the idea of saving for a toy/game, and explain to your child how much money they’ll need to reach this goal. Then, get their pocket money and show them how long it’ll take to reach the goal, depending on how much money they save.
You can use little books or apps to help with this, and it’s a really fun way of engaging your child with money from a young age. They see the value of saving more money – it helps them achieve their goals sooner – but also demonstrates how much they can spend while still reaching their goals.
Admittedly, budgeting is a lot harder to teach a child because they don’t have to deal with expenses. In this regard, you’re hoping to instill some basic financial common sense that helps them budget when they get older and start paying for things.
Show Them The Value of Earning Money
This will sound like a very old person thing to say, but kids don’t understand the value of money. They grow up thinking it appears out of nowhere and have no concept of how hard you need to work to make it.
That’s why all kids will benefit from earning a weekly/monthly allowance.
Show your kids that you’ve got no problem giving them money if they work for it. You don’t have to force them to do anything crazy; just encourage your kids to do a few chores or tasks before giving them money. It demonstrates that hard work equals financial rewards. They’ll appreciate every penny a lot more when they know where it comes from or what should be done to get it.
Moreover, they start learning that the harder you work, the more money you’ll get. If they ask to do chores every day, they know they’ll get more money from you. This translates to their teenage and adult years – they’ll be more likely to look for jobs and put in the effort to earn their way.
As a knock-on effect, your kids will also be more inclined to save money and make budgets when they understand the true value of it. They worked hard for all the cash they earned, so they want it to go as far as possible and won’t want to spend, spend, spend!
Talk to Them About Investments
One of the cornerstones of financial security is learning what to do with your extra money. This refers to any money that doesn’t need to go on expenses. Should you leave it in your bank account, put it in a savings account, or invest it?
Investments are extremely powerful. They help you save money while gaining more of it over time. Talk to your kids about this and explain how beneficial it is to have some investments. Start things off for them by making a small investment in their name – and then demonstrating how much money they’ll earn over time.
Furthermore, talk about the benefits of diversifying investments. Look into the idea of cryptocurrency and the possible advantages of putting a bit of money into this domain. Show them tools like a base block explorer when they’re a bit older – it’s a great way of viewing certain crypto markets and seeing valuable transactions. Obviously, stuff like this won’t be suitable for young or teenage children. This is the type of thing you talk to them about when they’re becoming adults – but you can explain basic investments when they’re younger, too.
Explain How to Avoid Fraud or Scams
Good financial habits mean nothing if you can’t detect fraud or scams. So many people get their financial security ripped away by malicious actors. The growth of the internet makes this even more prominent – and young people are often big victims. Teach your kids about fraud and explain how to spot obvious financial scams.
Encourage very basic habits like never clicking on rogue links and not providing banking details to someone online. These are things young kids need to learn about to avoid making mistakes – hell, some kids have accidentally given their parents’ bank details to scammers!
As your child ages and becomes more independent, they will earn their own income and need to fend for themselves. If you raise them without teaching them about fraud or scams, they are more likely to fall victim to them. So, educate your kids on this topic, and they will grow to be more financially astute.
And that brings us to the end of this post. Don’t let your kids grow up with the same financial negligence you had. As parents, you’re blessed with so many tools and technologies to teach your children about money. There’s no excuse! Go through all of these ideas with them to help them become more financially secure. You can teach some of these things from a very young age – like saving or budgeting – while others come as your child gets older. It’s also never too late to teach your kid about money; they could be going to college this year, but it still helps to talk to them about these topics.
