Sometimes, all your children need is a gentle nudge to act. Here are six simple ways to guide your child towards financial well-being.
1. Have them experience delayed gratification
Change happens when a person is motivated by an emotional trigger or an imminent consequence. When children face a choice like spending their summer job money on a new phone or socking it away for a comfy retirement 40 years from now, their brains have a bias towards instant gratification. For rationality to kick in and steer them in the direction of sounder decisions, they need to experience the highs that come with putting off what they want now to get something better in return. At first, it can be small stuff, but once the mind understands that there is a bigger reward waiting, it will take note.
2. Start early
We now know that financial habits crystalize as early as seven years old. The window of opportunity to set youth on the path to financial autonomy is narrow, but it’s entirely within reach.
The best way to start teaching children early is to start the conversation early. Children can start understanding the value of money by the age of 7.
They might not understand what these weird paper and coins are exactly worth, but a few simple tricks can help them value how to use money. For example, with birthday or holiday money, you can help them decide what to purchase by evaluating how much they want a product with a rating score. If they rate bigger purchases higher, you can help them budget and save money for those items.
3. Arrange jobs to do
You can offer them jobs that are outside their normal chores. For example, you can have them paint the bathroom walls. You can pay them for the supplies and work and let them figure things out. Or perhaps purchase projects they make on commission if they’re creative. There’s of course always the option of having them do yardwork for friends and family, and they can advertise their service.
The point of these small jobs is to teach them the time invested in work pays in the end. They start to value their money as they spent time and effort earning it.
4. Arrange a budget
Budgeting is a skill that even many adults lack, but can be vital in crucial times in their lives. You can teach them to set aside a certain amount of funds for food, clothing, video games, and other things they would want to pay money for. This would also include savings where they can put aside a little money to allow them to make a big purchase.
5. Review spending together
While budgeting is a great tool, it becomes far more useful when you go over how that money was spent. You can start by going over your spending and rate how well you’ve used your budget. Then you can review their spending together so your child can best understand if they truly valued how they were spending their money.
6. Take advantage of game-changer tools
The challenge lies in combining all those nudges in an efficient and timely manner. The game-changer is that technological tools are here to help. Apps such as the WALO app turn pocket money into daily hands-on life lessons make introducing responsible financial choices early on in life a breeze.
They can help your child organize their savings, their available funds they can budget with, view their allowance schedule and tasks, and makes dealing with their money fun and rewarding.