By: Frank Conway
When the new CEO of Coca-Cola, James Quincey took over the reins of this mega-brand, one of his first announcements to staff was his ambition to foster a new corporate culture; where making mistakes was OK. According to Mr. Quincey, it is through mistakes that we really learn. The same can be said for good money management.
When it comes to learning about money, it is important to learn the essentials, including budgeting, planning, how compound interest works and the nuances of diversification. So getting kids in on the act from an early age and providing them an opportunity to learn from mistakes will reap many benefits.
Following are some essential tips parents can use to help their child learn about money…and how to manage it effectively:
- Let Your Child Make Mistakes
Sometimes the best lesson comes from a poor decision, especially when your child is young and the financial loss won’t be so great. Next time your child receives a windfall of money, let them do as they please. If they want to spend it all, let them! But when the money is gone, let there be no rowing back and giving them some more if and when they ask…let them learn the loneliness of being penniless…it can serve as a really powerful life lesson that might just make a world of difference later in life.
- Open a savings account and teach them about planning, interest and tax in one foul swoop. So, each time they earn a little interest on their savings account, tell them how this is a form of income and when we earn income, we also must pay taxes and this is where the lesson on deposit interest retention tax (D.I.R.T) comes in. D.I.R.T tax is currently set at 39%.
- Have a weekly money challenge – take them shopping and give them a token money allowance and challenge them to find the best value on 3 groceries. Make it a little fun by selecting the groceries they are most enthusiastic about; ice-cream, cereal, milk. Allow them the freedom to make their purchase but within the limits of their budget and after, review and compare their purchase decision with any store offers they may (or may not) have availed of.
- Money discussion time – when it comes to essential money decisions, like planning the next family holiday, use the opportunity to include your kids. Let them see that holidays involve planning and money, this will allow you to communicate the need to plan for important spends.
- Teach them the difference between needs and wants – sometimes, we can all be emotional when it comes to things we really want, but do we really need them? For example, while celebrities are often used to promote the most expensive products, less expensive ones be just as good. So, it’s important to teach your kids how they can buy more of the things they need by learning to ignore what celebrities want them to do.
Remember, money is a precious resource but the options to spend it are endless. Kids can learn some great life skills from a young age, these are lessons that will last, and benefit them for a lifetime! For more information, visit MoneyWhizz.org