Today’s volatile market environment tasks financial professionals with the challenge of providing their clients with education and advice that makes sense to all walks of life. Financial professionals work hard to provide you with the best financial picture for you, no matter what market challenges are out there. As they focus on your financial situation, you may want to take the time to consider how this economic uncertainty affects your children, who have yet to start or are just beginning to learn about money.
Important economic lessons can be learned from this recession. If you consider the drastic financial events that have occurred over that past two years, the low level of confidence among investors has many people realizing just how important it is to save and to develop that mindset early in life. There is no better time and place to start than with young children. Promoting financial literacy, an area of weakness with young people, is essential.
Teaching young people money management isn’t typically at the top of a parent’s “to do” list, but in a society where all people including young children are constantly enticed to spend, it is more important than ever to take the time to educate them. The current economy makes for a perfect backdrop to have these discussions. One of the best ways to teach a child about the value of money is to allow them to have and control their own. This opens up a discussion about saving their money to buy what they really want in the future, versus buying something on impulse. Below are a few lessons to teach:
- The time it takes to earn money.
- Set the expectation that they will not always be given what they want when they want it.
- The monetary value and opportunity cost of saving versus spending.
It is also important to teach young people simple accounting methods such as keeping records of money saved, invested, spent or borrowed. This way they can see where their money is going and how well they are managing it. Lastly, allow young people to make their own decisions about how they want to spend their money, whether the decision is a sound one or not. By giving them the freedom to choose what they purchase, it can open up a discussion about the decisions made and whether or not they were appropriate. This discussion should lead to the use of common sense when making a buying decision, such as doing research, waiting for a sale or price reduction, and avoiding impulse purchasing by thinking about the decision over night.
All adults teach their children differently about money. How you do it is up to you. The key is to make sure they are learning about money in a logical manner and to make responsible decisions concerning its use.