Knowing how to handle your finances effectively is the key to financial success, especially in difficult situations. However, people are not born with such knowledge. That is why it is important to educate children at an early age.
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“Financial education initiatives start when children first show an awareness of money, usually around the age of 5 or 6,” says Kwan Hatai, a certified financial planner and certified financial therapist at Epiphany Financial Therapy. It should start from.''
“Initial conversations may center around the basic value of money and the concept of saving,” she says. “As the child grows, the dialogue can evolve to include more difficult economic topics, always in line with the child's cognitive development and level of understanding.”
Here's how to talk to your kids about tough money situations, according to two financial experts.
impulsive spending
Hatay said explaining impulsive spending to children is similar to the temptation for children to pick the first piece of candy they see.
“To combat this, offer a waiting period before making a purchase so you can decide if it's something you really need or want before you buy,” she said. “Demonstrating this behavior yourself can serve as a powerful, practical example and reinforce the lesson that spending money patiently can lead to more satisfying choices.”
Andrew Houser, co-founder and co-CEO of Achieve, and a debt and consumer finance expert, says parents should start teaching the principle of delayed gratification from an early age and preschool. He said he could start teaching.
“This teaches children how to plan ahead and, in turn, teaches them self-control. This skill will serve them well throughout their lives in avoiding difficult money situations and understanding (and avoiding) impulsive spending.” Masu.
“For young children, this may mean learning that you can live with being told 'no' and that you can't always get all the toys you want.” For teenagers, it means allocating their pocket money so they can save up to buy tickets to events or new outfits. I might.”
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debt
“Just like borrowing money from a friend and having to pay it back, you can incur debt as a result of spending money you don't have,” Hatay says. “Stress the importance of only buying what you can afford and the benefits of saving for larger purchases. This creates a sense of financial discipline and foresight.”
Houser said a good time to start explaining how interest and debt work is when children are about 10 years old.
“Parents can help their children open a savings account and explain how the money they save will grow,” he says. “On the other hand, if a child wants to borrow money to buy a toy, for example, a parent can lend the money with interest and explain how it works.”
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unemployment and economic instability
“These themes can be broached through discussions about the importance of work to earn money and what happens when finding work is difficult,” Hatai said. “We teach resilience and planning by emphasizing the importance of saving in times of irregular income. By encouraging curiosity about different careers and the value of adaptability and continuous learning. , and prepare for future financial security.”
Houser said that once children enter elementary school, help them find ways to earn money, and then start talking to them about what money is, what it means, and how it can be used.
“Help your kids spend, save and put that money toward charity,” he said. “If you let them make spending decisions while they are young, the effects are benign, but they can learn from their mistakes.”
bankruptcy
Hatay said that while bankruptcy is a complex issue, it can be explained in a way that is easy to understand for children by explaining that bankruptcy is a situation in which an individual is unable to pay their debts and must seek assistance.
“This scenario highlights the importance of careful financial management and living within your means,” Hatay said. “This provides a valuable lesson about the consequences of financial decisions and the importance of responsible money management.”
Develop a positive money mindset
While discussing these tough money situations, Mr. Hatai said that cultivating a positive money mindset is very important.
“This includes portraying money not just as a means of consumption, but as a tool for achieving goals and creating a life of value,” she said. “Teaching children to view money through the lens of gratitude, generosity, and responsibility promotes a balanced and healthy relationship with money. Look beyond spending to saving, investing, and donating. By encouraging them to do so, they are laying the foundation for a comprehensive understanding of their financial health.”
This article originally appeared on GOBankingRates.com: I'm a financial expert: How to talk to your kids about tough money situations
