How to Teach Your Kids Good Money Habits
Are you looking for ways to get your children ahead in life with their finances? Do you want to ensure that they know how to handle money before they get their hands on some? If so, then it all boils down to teaching them good money habits.
See below for a guide that you can use when teaching your children how to manage money, as well as many other helpful tips.
1. Understand the Habit Loop
Everyone treats money differently. Some are spenders and would happily blow it all while shopping at the mall if they could. Others are savers, and would rather save for emergencies, retirement, and the like before spending an ounce on themselves.
No matter how you react to receiving money, that reaction is the byproduct of your money habits. In other words: you've developed a habit—good or bad—for how you manage your money. You can bet that your children will follow the habits they see in you.
In his book The Power of Habit, Charles Duhigg underlines something called a "habit loop", which is the cadence everyone follows in developing a habit—cue, routine, reward. Every habit starts in that order.
Let's break those three stages down about money:
• The Cue: You're handed money (payday)
• The Routine: How you choose to spend/save your money
• The Reward: Satisfaction of saving or holding a product in your hand
It's important to understand the habit loop so that you can use it in your favor. You can teach your children about the reward of managing money responsibly and how to look at the bigger picture.
2. Make Them Work For It
Back when he was a child, Mark Cuban had his eyes set on a pair of shoes he really wanted, so he asked his dad to purchase them for him.
His dad's response was making Mark walk around the neighborhood going door to door selling trash bags that his uncle needed extra hands with. Eventually, he made enough to purchase the shoes, and wore them into the ground.
Cuban attributes that one experience as the moment he learned how to sell. He also points to it as the moment he learned the cadence for making money: hard work equals more money.
It’s an important lesson to learn so that when your children get into the real world, they're able to view hard work as the potential to make more money instead of seeing their job as a job, and nothing more.
How can you teach your children to work for their money? Pay them an allowance for performing designated chores around the house or mowing the neighbor's yard.
Encourage them to find windows of hard work, but don't overwork them. They have the rest of their lives to do that.
3. Teach Them Budgeting
Dave Ramsey has helped thousands of people get out of debt. He himself had to climb out of a massive pile of debt to save his family, his life, and his marriage.
Any time he speaks with a family who shares their own story about getting out of debt on his podcast The Dave Ramsey Show, he asks them the same question: what was the biggest factor to getting out of debt? The answer is always the same: budgeting.
You can give your child a massive advantage in life by teaching them how to assign a task to every dollar that they receive.
Every month, give them a prepaid card with a certain amount of money on it (the amount is up to you). Teach them how to budget for things like expenses, wants, needs, and savings.
4. Teach Young Ones the Art of Saving
If you want your child to become a saver, you have to get them while they're young. Young ones develop spending habits fast, especially in the "I need it now" world we live in today.
As cliché as it might be, a piggy bank is still the best teacher for this. Your child can visually see the money being stored for safekeeping. This can help you ensure that your child has the ability to save after you've passed on.
5. Help Them Think Long-Term
Think back to when you were in college. Did you ever once think about the thousands of dollars you'd have to repay after you graduated? Of course not!
Thinking about long-term finances doesn't come naturally to most people. But if you can get your son or daughter to start thinking about long-term finances now (and saving towards them), then you'll give them a step ahead.
This can also help you stress the importance of applying yourself in high school. Once kids start to see how strong grades can help them get higher education for less (through scholarships), they'll be more likely to work towards it.
Instill Good Money Habits in Your Children Today
Now that you have seen an in-depth guide on how to integrate good money habits into your children to help them in the future, don’t forget to also make sure their financial future is protected with life insurance.
Having a life insurance policy in place will make sure your loved-ones are protected against the financial impact caused by a sudden and unexpected death. We invite you to visit our website learn more about specific products, get advice, and most importantly, begin the process of protecting your family.
Our content is created for educational purposes only. This material is not intended to provide, and should not be relied on for tax, legal, or investment advice. Vantis Life encourages individuals to seek advice from their own investment or tax advisor or legal counsel.