Do you think you set a good example for your children when it comes to spending and saving? Learning how to be a positive financial role model will equip your kids with essential money life skills.
When Mykidstime asked parents about their key financial concerns, the survey of 663 parents showed that more than 85% of parents are either Extremely Concerned or Very Concerned with setting a good financial example for their kids. This continues to be the top concern among parents – even ahead of whether their pension will be enough to cover their retirement needs and even with cost of living rises.
Are You a Positive Financial Role Model?
As it turns out, parents are right to be concerned with setting a good financial example. University of Cambridge research for the Money Advice Service shows money habits and attitudes are formed by the young age of seven.
Long before your children ever step foot in a classroom, they have overheard numerous conversations, observed countless financial choices and have experienced the very real results of our financial decision-making – all of which forms their money mindset.
Being a positive financial role model for your children isn’t always easy and most of us didn’t grow up with the best role models ourselves, so the learning curve can be steep. Keeping the following key concepts in mind can help.
Money Comes from Working
Regardless of whether you tie payment to chores or encourage your child to look opportunistically for jobs that need doing (or both), a weekly allowance or pocket money can be an excellent tool for teaching your kids about how to manage money. There’s no better way to learn the value of money than to be managing and making mistakes with your own.
With that said, there’s a delicate balance between paying your child to do work and ensuring your child doesn’t expect to be paid for everything they do.
If You Spend Smartly, Money Can Make You Happy
“If you think money can’t buy happiness, you’re probably not spending it right,” claim the behavioural scientists behind the book Happy Money: The New Science of Smarter Spending. The book gives good insight into why you can get more happiness from your money by following five key principles:
- Buy experiences – The memories last and the benefits will outlive any material thing.
- Make it a treat – You’re less inclined to appreciate something that’s always available.
- Buy time – Hate cleaning? Pay someone to do it for you! *my personal favourite*
- Pay now, consume later – You’ll benefit from the anticipation and avoid the buzzkill.
- Invest in others – We all know how good it feels to help others, financially or otherwise.
So, while more money and income doesn’t necessarily bring about more happiness, the way you choose to spend it can. Using your money in a way that aligns with your values – for example, buying environmentally-friendly products or shopping locally – will make you feel more in control and content about your spending.
Shop Around to Compare Prices Before You Buy
Ahead of any planned spending, we should be well-informed of the reviews, costs and alternatives available for comparison. Nowadays, those comparisons are at our fingertips with a quick search online. Most stores even have online shops that tell us whether an item is in stock at that store, which can be super handy with kids in terms of managing expectations.
Doing this research together with your kids ahead of any purchase is not only a good habit to encourage, it’s a great use of the internet and a great activity to do together.
Take Advantage of Everyday Teachable Moments
Children also need to learn that money is limited. You can demonstrate budgeting and planning by making a list ahead of the food shop to focus on needs. If you think about it from a child’s perspective, simply walking up and down the aisles throwing items into your basket model impulse purchasing, which is not only a bad habit, it’s an expensive one!
If you’re up to it, you can share your budget with your child and challenge yourselves to find savings as you go by switching to generic brands or items on sale. You can also make it fun by planning with your child what you might do with the extra savings.
Spend Within Your Means and Plan Ahead
Learning to spend within your means and plan ahead is foundational to effective money management. Many of us learned this lesson long after we flew the proverbial nest (and some of us will never learn).
The importance of learning this particular lesson at a young age could help your child avoid making a small financial misstep now – for example, spending all their pocket money on unnecessary ‘stuff’ – but will undoubtedly benefit them as they grow when the cost of spending beyond their means has much more serious implications.
Cents for Kids is dedicated to supporting parents with the tools and resources they need to model good money sense for their kids by taking advantage of every day teachable moments.