Preparing your kids for financial success

We hear about how parents remain concerned about suitably preparing their children for financial success in the future. However, while a large majority discusses or covers the issue at hand, they fail to inculcate suitable life lessons or financial literacy for their children which leads to multiple issues later on. From online investment platforms to discussions revolving around family finances, there is a lot that you can do for preparing your kids for financial success in the future. As they say, learning something is always easier when an individual is a child as compared to learning the same as an adult at a later stage. This is highly applicable in terms of financial literacy as well.

A study in 2018 by the University of Illinois in Urbana-Champaign discovered that a whopping 36% of young adults had sizable financial risks. Additionally, the study discovered that just 22% of people between 18-24 had proper ideas about what investment avenue is and was financially stable, i.e. they were better at planning out their finances, possessed savings/checking accounts and were less likely to make use of expensive alternate solutions like loans and payday lending. The remaining 78% were not as comfortable as surveyed by the University and even amongst those who were financially comfortable, they were moderately comfortable regarding overall financial literacy levels. These are issues that may affect the future generation since many young people are entering working lives and adulthood without proper financial abilities for securing their futures.

Tips on prepping your children for financial success

  • Build the right perspective– Ensure that you do not pass on any negative perceptions or insecurities regarding money to your kids. Make them realize the value of a priority list, i.e. what is more valuable and necessary at the current juncture than something else. If you cannot afford anything or wish to spend money on something, explain that you have other commitments. Show children how to prioritize their wants and needs.
  • Early starts are always the best ones– Research as outlined by the University of Michigan, clearly shows that by the age of 5, children are more likely to develop emotional reactions towards saving and spending their money. This may translate into future real-life spending and money management behaviour. As a result, start out early, discuss all financial terms, topics and family finances with the children. Use a jar as a savings place for cash and then explain to the kids that they will have to take money out of the same for buying things. This will help them manage finances better from an early age while learning budgeting at the same time.
  • Keep things transparent regarding family financial aspects– You should be open about the financial position of the family, expenditure, income and future goals. You should talk about debt and other issues as well. Make grocery shopping and budgeting a joint activity with the family in this regard.
  • Set up financial tools for children– Start out by opening an online investment account in the name of your children. Let them see the investment, the frequency, and how much it has accumulated. You can let them know about the purpose of this investment as well and how it will secure them in the future. Start with child plans and a wide variety of ULIPs or other mutual funds in this regard. Set up bank accounts for your children and slowly let them handle actual money. Have a little leeway for letting them make their costly mistakes.
  • Always be realistic with your children– Do not paint a rosy picture of the family finances to your children. Be real about how things stand, what you can afford, what you cannot, and how things are shaping up for the future.
  • Emphasize more on quality time and experiences– Instead of teaching your kids the value of material things, teach them how priceless experiences and quality time can be. Do not raise an entitled kid who knows that he/she can use every trick in the book to get what he/she wants, irrespective of the parents’ financial standing and whether something of this sort is suitable or not.
  • Family budgeting should be a joint affair– Have budget meetings with the family and ask your children for their opinions on some heads. Start building up this habit of contributing to the budget and this will go a long way towards helping your kids understand what it actually takes for their parents to give them the life that they currently have.
  • Build a mini economy of their own– If you give your kids an allowance, help them learn budgeting and savings concepts. Give them a few more ways to earn money by helping around the house and so on. When they wish to make purchases, they will have to use half of their own savings to pay for the same. This will teach them the valuable principle of delaying gratification or satisfaction while they will value and appreciate whatever they buy so much more.
  • Create an entrepreneurial bent of mind– Show your children how to create their small businesses and earn money by offering services or products to family members, friends and neighborhood Encourage them to start hustling from a young age since that will automatically teach them money management much better.

These are some tips that will help you prepare your kids successfully for a brighter financial future.

 

 

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