I’ve got another great guest blog for you today. This time from Nancy Philips who is the founder of Zela Wela Kids, a fantastic resource for teaching your kids about money (and good for grown ups too!)
Parents – You Don’t Have to be Rich to Successfully Teach Your Kids about Money
In the past several years people all over the world have experienced major shifts in their financial lives. Millions have experienced job loss, foreclosures and bankruptcies. This has parents everywhere wondering, “Can I teach my children good financial skills when I’m facing major challenges myself?” The answer is absolutely “yes”!!
How is this possible? Because there are very simple things you can say to your children and do with your children that will begin to provide them the hands-on experience they need to develop their self-discipline and decision making skills.
The key concepts for success in teaching children about money are:
1. Simple Relevant Messages
Talk about money on a daily basis in an objective way so your children learn that they can effectively begin to manage their own money and thus control their own financial future. The lessons don’t have to be long, just relevant, consistent and fun or funny whenever possible, this will make them more memorable. You can talk about why you need to buy a certain item, the cost of things, the difference between a need and a want or why it’s important to save for what you want. Awareness is the first step to learning.
2. Frequent and consistent discussions
Financial education is not about theory and hearing something once. Your child needs to get lots of “doses” of information so that they begin to think about how to problem solve and create solutions when it comes to prioritizing and decision making. When they learn one concept it will allow them to then think differently when they learn another concept as it relates to the first. There is no rush to teach them everything quickly. It’s far more important to make these types of talks a regular part of everyday conversation.
3. Hands-On Practice
Whether you’re learning an athletic skill or how to drive a car, you may learn some of the information from a book but to really master the skill you must get plenty of hands-on practice. Financial skills are exactly the same. Let your child handle money regularly so they have the opportunity to learn from the consequences of their decisions and refine those decisions in the future. There is far less at risk if they get plenty of practice with small amounts of money when they are young. An allowance is the most common way for young children to gain the opportunity to manage their own money on a weekly basis.
Once your child is about five years old, help them learn how to divide all their income into four categories – give, invest, save and spend. The “GISS” method of money management is one of the most powerful concepts for building wealth. The framework helps children learn good numeracy skills as they manage their own money for different purposes and begin to set goals. Read more about the GISS method as it pertains to children here. http://tinyurl.com/7m7trbt
4. Positive, Encouraging Environment
A person’s financial “blueprint” or attitude towards money is developed during childhood by the people raising the child. As such, it is of utmost importance to try to be as objective as possible when speaking about money in front of your child and to avoid speaking negatively about it. Comments such as “you’ll make us end up in the poor house” or “we’ll be living on the street” can be devastating and long-lasting for a child. The family financial situation is not the child’s fault and they should never be put in a situation where they feel responsible, they are not emotionally developed enough to handle it. Instead of saying things like “we can’t afford it.,” which shuts the conversation (and their hope) down, try something like “how do you think you could raise the money to buy it?” This question shows the option of success and creates the opportunity for problem solving. Brainstorm with them and say, “what are ten ways you could raise the money? Let’s write them down.” This will get their brain working and they will begin to take the steps to achieve their goal if they are truly serious about wanting the item.
Your current financial situation is a reflection of past events, decisions and actions. Your future financial success, and your children’s, depends on the actions and decisions you make starting today. Your children don’t need any complex investing lectures, just simple, consistent real-life lessons and plenty of hands-on practice. Teaching your child may just help you as well. As they say, they best way to learn something is to teach it!
Nancy Phillips is the creator of the Zela Wela Kids book series and products which help parents teach their children financial and life success skills in a fun and inspiring way. Her website is: www.zelawelakids.com