Omolola Olorunnisola: Financial Habits to Teach your Children in 2021 - 9 months ago
Our habits define us. The things we do on a regular basis, and how they have become a part of our lives says a lot about who we are. Research from Duke University says habits account for 40% of our behaviour on any given day. Since our habit pretty much determines the outcomes of our lives, parents try as much as possible to help their children develop the best habits.
I see a lot of parents help their kids develop a reading habit, I see parents encourage their wards to regularly speak out and speak freely to help them become bold, I see parents jog together with their kids, teaching them to exercise regularly. How about we teach our kids some financial habits this year? Financial habits are not very common, which is understandable as we all are just coming to terms with the need to teach our children about money. But they are very important. Imagine you had started keeping track of your income and expenses from an early age, and have even made a habit of setting financial goals and investing since you were 10 years old, try to picture how your life would have turned out.
Here are some of the money habits we can teach our kids as we move fully into the new year:
The first step in achieving any form of financial success is setting realistic and achievable financial goals. Your goals define what you want and it gets you thinking and working towards achieving it. Like adults set goals at the beginning of the year or quarter, kids can do the same. Start by asking them how rich they will like to be at the end of the year and then help them shape their money dreams into realizable goals.
Setting financial goals will stir up a number of questions that budgeting will answer. Questions like, how do you achieve the goal you’ve set? How much do you earn now? How much more would you have to earn and save to achieve your goal? What are your expenses? What expenses would you have to cut back on in order to achieve your goal? A budget answers all of these questions and shows where your money is coming from and where you want it to go. A budget would also help separate your needs from your wants, as it would highlight the things you have to spend more money on and the things you can do without. Once your child’s financial goal is set, sit together, and map out a budget.
Kids naturally want the things they want immediately. This, coupled with the fact that technology has made it possible for us to get everything we want in a twinkle of an eye, makes it worse. Financial success requires being patient, it requires denying your impulse of what it wants when it wants it. Hence, it is important that our children cultivate the habit of delayed gratification. One way to help children delay gratification is to put away the things they frequently demand for. If it is not in their faces, they most likely won’t demand for it often. If you have older children, you can show them how waiting for that thing they want will help them achieve their financial goals. There are tons of material on teaching children delayed gratification you can read up on.
One of the most important financial habits we can teach our children is value creation; it is a major source of financial success. How much value you create most times determines how much you earn. Expose your children to value creation by encouraging them to think of other sources of income besides their allowance. Let them start thinking of ways of making money. If they have talents, teach them how to monetise their talents. Let them take courses that will teach them skills they can monetise. This shapes their money mindset and shows them the reward that comes with work and being able to create value.
Saving and Investment
Being financially savvy requires that one knows how to make, manage, and multiply money. To effectively manage and multiply money, you need to make a habit of saving and investing. Teach your children that it is more rewarding to save to invest than to save to spend. When you invest, you buy assets and assets determine how rich you are, they determine your net worth. Elon Musk recently became the richest man on earth because the value of his assets went up not because more people bought his products. Assets give wealth, so it is important we teach our kids to save and invest.
This list is not exhaustive, there are other financial habits we can teach our kids, some of which are reading financial literacy books and playing financial games like monopoly. The thing about parents teaching their kids about money is that it doesn’t just help the children make better financial choices; it fosters a healthy relationship between parents and their kids and forces the parents to make better financial decisions.
Let’s teach our kids about money in 2021.
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