This is a guest post by Tehn Yit Chin over at @ Cheap as Chips, “a personal finance blog with an Australian spin”. Lend him some support by checking out his site.
We, as parents, have an enormous responsibility to our children. As soon as they are born, we are responsible for their well being. Initially, we give them care and ensure that they are healthy. As they grow, our responsibility shifts to their behavioral development, and one aspect of this is the way our children see financial matters being handled.
One of the ways that children learn is by copying. The child observes our actions again and again over a period of time, and they will start to copy our actions. When our children are in their toddler age, development of simple actions like learning to walk and talk are usually accelerated when there are other kids around for our child to copy.
The children also learn by repetition. Something that is performed over and over again will be ingrained in our children’s behaviour, almost like a second nature to them.
Our actions in the way we, the parents, handle money are also important as our children will be exposed to them, and will copy them if there are exposed to them over a long period. ie, If the parents are problem gamblers, there is a higher chance that children will be gamblers as well, or if the parents always uses credit irresponsibly, the child would probably behave likewise.
So what can we do to give our kids a better way of dealing with financial matters.
- Involve the kids with financial decision making – When the children are able to understand, involve them in most of the day to day financial decision making. This could be simple things like a discussion with them on deciding on which type of bread to buy, or clothing from Target vs clothing from Calvin Klein.
- Ask for the children’s input when it comes to setting up the family budget – The kids will want to be part of the the family budget. This will also show that their contribution in the decision making will not only affect themselves, but also the family as a whole. Make it a part of a family ritual, and make it fun for the kids.
- Set up a savings account for them – A bank account for them is a real motivation for the kids as they can see the real results of the decisions made. A bad decision means that the account balance will go down, and a good decision means that the account balance will go up. Make sure that the bank account has the kids name on it so they understand that the bank account is theirs.
- Reward the kids as you reward yourself – This will give the kids a targets to aim for, financially. EG, if the child wants to buy that comic book, ask the child to save for it from his pocket money.
- Be upfront with them – Don’t colour the family financial situation for the kids as this may bring up false expectations in the kids. You know, if the family can’t afford to go on the big holiday this Christmas, let them know and the reasons why. Or if the big holiday is happening due to strong financial commitment from family, let them know that as well.
These are five items that I will provide for my son when he gets a bit older, (at the moment, he is only 21 months). My wife and I already have started a couple of these ideas, in particular the savings account. Remember to keep doing these things for an extended period; to be copied and repetition is the key.
By ensuring that your children are positively influenced, financial wise, we are preparing them for a much brighter future. Remember that we will not always be about or in a situation to help them out.