"Start early" is what they say when it comes to personal finance and investing. Learning about personal finance as early as childhood has proven successful in later years. Studies have shown that money habits in children are formed by the time they are seven. As they gradually become familiar with basic financial topics, children can take the lessons well into their adult life and feel more comfortable accessing financial services.
Learn from our article how to get your children into personal finance:
Good financial habits are not limited to financial concepts, such as emergency funds, debts, investing, etc. Financial habits can also be instilled through awareness, patience and ethical spending. You can inspire awareness by showing the difference between financial needs and wants. If your child wants to buy a game but needs a pair of shoes, you can remind them that they cannot buy the shoes they need if they buy the game. If your child really wants to indulge in impulse buying, as many children do, instead of refusing them, ask them to wait for a day to rethink their decision. This will help your child to weigh their decision and understand possible outcomes. Once children have become more independent and responsible with their own money, it is time to teach ethical spending. Ethical spending could be donating to charities or buying from sustainable businesses, which positively contributes to the market.
Chances are that your child spends a good amount of time online, and they already know about Gamestop. Use it as a lesson to teach your child about saving first. Many parents use piggy banks or saving jars as a tool to get their children started. Others pay their children for doing chores to teach them about earning and work ethic. But there are additional ways to instil good money values, and not all of them require you to do anything. For instance, children are very perceptive of their surroundings. Even if you preach good financial habits, your children will eventually pick them up if you do not follow them yourself. Therefore, it is important to set healthy examples for money.
There are many ways to involve children in personal finance. A good start would be to open a bank account for their savings and open an investment account on their behalf. You can also get your children actively involved. Start by asking your child what brands or companies they like to get their attention. Children may not know the complexities of businesses, but they are aware of popular brands. Encourage them to choose stocks or funds to add to their portfolio, and you can show them how their investment is doing once in a while. If you do not want to use real money, you can use virtual investment accounts that many brokers and banks offer. Choosing stocks with your kids while they are young will enable them to understand how markets go up and down. Your children will be prepared for the realities of market changes and help them make educated decisions as they become older. You eventually want to allow them to purchase their own stocks with their own money. By the time they are ready to invest, they may have amassed sufficient funds in a savings account.
Allowing your child to make informed decisions and take real risks is critical. Money may be lost, but the goal of the exercise is to acquaint children with investing, which includes understanding that investments have benefits and drawbacks. Whatever the outcome may be, the experience of tracking their assets and profiting and losing money is priceless.
Last update: 02/12/2021
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