Have you been rewarding your child for good results or trying to assuage your guilt for working late nights by showering them with material gifts? School may teach our children how to solve algebraic equations, but most kids will probably not learn how to properly manage their finances until much later in their adult life after they have gone through much trial and error.
If you have never discussed the value of money and financial planning with your children, you can't expect them to automatically be responsible with their money. In fact, according to local papers, bad debts written off by banks for credit and charge cards rose nearly 60%, from about $115.4 million in 2008 to $183.9 million last year! There are a number of ways to cultivate healthy money habits to start your offsprings on the right financial footing.
It's never too early to teach your children about money. Teaching your children about our complex financial system may seem daunting, but you can help put your child on the right track by encouraging smart habits now. Forget about using old wives tactics (eg. police will come and catch children who have too many toys) to scare them into spending less. Children are smarter than you think. Answer your children's questions honestly and explain to them why you make certain financial choices.
Let them be responsible for their own budget so that they can learn to be responsible for their own spending. Start with something simple for primary schoolers by explaining to them that the $2 daily allowance will be apportioned to food and drinks. As they grow older, increase the daily allowance to a monthly allowance which includes transport, food and entertainment.
One way to impart financial skills whilst using that time to bond with your kids is by applying the lessons in real life activities. For instance, when grocery-shopping share why you're buying a certain brand over another more expensive one. This would also be a good chance to explain the concept of advertising and how it affects consumers.
Teach them about the mechanics of bill payment so that they will not take their broadband for their computer or handphone connection for granted. Let them pay their own bills so that they are aware of late charges or terminated services if bills are overdue.
Don't let them have the habit of stretching their hand out for money each time they want a new video game or the latest comic book. Instead, offer to let them earn the extra cash if they do an errand for you. For example, give them $20 each time they help with extra duties like babysitting while you take your spouse out for a date.
Consider opening a savings account for your child and working with him or her to make deposits and keep track of savings as they grow. Other than savings, teach them how money can make money. Buy a small amount of stocks for them from their favourite company (e.g. MacDonald's) to encourage them to be more excited about learning the ropes to investing.