Teaching your kids about money is one of the most important things you can do as a parent. Yet many of us overlook financial lessons in favor of other things like looking both ways before crossing the street and running away from strangers.
And I get it. Those two lessons are important for your child’s safety and well-being. But don’t short-change the importance of handling money wisely.
There are many benefits your kids will experience by understanding how to be smart with their money.
In this post, I am going to talk about 4 financial lessons you need to teach your kids and why they are so vital.
4 Important Financial Lessons To Teach Your Kids
#1. The Power Of Patience
Being patient and money are an important concept that many of us have begun to ignore. Just look at the soaring credit card debt of most people. They buy now to fill their need without worrying that they don’t have enough money.
Trust me, the stress from mounting credit card debt is much more draining and harmful to your life than the joy you get out of buying something.
So teach your child patience. Show them that they can’t always get the toys they want. They need to learn to save their money until they have enough to buy it.
This lesson will treat them kind throughout their lives when they avoid credit card debt and can get by financially by helping them to better understand what they value.
#2. Valuing Money And Work
Another lesson your kids need to learn is the value of money and earning it. If you just give your kids everything they want, they will expect everything to be free and won’t be willing to put in any effort to earn money.
While this might not seem like an issue when they are young, as they get older it will be. They won’t understand the meaning of hard work and will have trouble making ends meet.
I learned this lesson when I was little. I wanted an NES. My parents said that if I wanted it, I had to pay for it myself. It was $100 and to a 10 year old, saving $100 was like the adult me now saving $1,000,000!
But I did my chores and saved my allowance and eventually I bought my NES. I valued it and took great care of it, all because I learned the value of money and hard work.
#3. Understanding Interest
The next lesson for your kid to understand is compound interest. Even though interest rates are low, they can still earn interest. And while a couple of pennies to you and me don’t excite us, it does excite a kid.
By learning about compound interest and making money from just saving, you plant the seed of the importance of saving. This is huge because financial freedom starts with saving.
In the beginning of the journey to wealth, your savings rate is much more important than the interest you earn. Once you get to a certain level of savings, only then does the interest rate you earn play a larger role.
So don’t discourage your child from saving even though they will only earn pennies on the dollar. Encourage them and plant the seed of saving money.
#4. Living Within Your Means
The last lesson for you to teach your kids is to learn to live within their means. This is a great opportunity for you to show them real life examples.
Let them sit in and look at your budget. Then when you go shopping, you can have conversations with them about what you are buying and why and what you aren’t buying and why.
This lesson ties in nicely with the power of patience so you should be able to teach them two lessons at once.
And if you aren’t living within your means now, take this opportunity to learn along with your child about the importance of staying out of debt.
It is up to you to teach your kids about personal finance. If you don’t, you run the risk of them being horrible with money and living a stressful life and not being the best they can be.
So take the time to teach your kids about money and help them to be smart with money so that they can enjoy their life to the fullest extent.
Author Bio: Jon blogs at Compounding Pennies, a personal finance blog that helps readers improve their finances one day at a time by keeping things simple.