Financial illiteracy is a major global challenge. When the coronavirus pandemic struck in early 2020, the first problem that surfaced was the financial issue. Do we want this issue continues every time when we have global crisis? No! Then we need to educate ourselves and kids about finance.
Think about this – if you have a time machine that can bring you back to 10 years ago, what would you do differently? Many said that they wish they have saved and invested more. We want our kids to know saving and investing earlier for sure. Let’s see what the 5 things are we can teach our kids about finance.
- The purpose of money
We need to teach kids that money is a tool to help us do what we want. When we have enough money, we feel financially secure. With money, we have more choices in life. We need money for almost all aspects of life, i.e. house, car, food, clothes, etc. We should not worship money. We should not ignore the importance of money too. If we ignore the importance of money, our kids will feel that. They might ignore money matters in the future. This might lead them to not being able to properly manage their money.
- How can we earn money?
Parents are working hard to bring back money so that there is food on the table. However, kids might not understand why parents need to work and have lesser time to spend with them. The kids needs to be educated on how money can be earned through exchanging time for money, business and through investment. This will help them appreciate your hard work.
- Needs and wants
When parents are busy working and have lesser time with kids, it is easy for parents to feel guilty and tend to buy what the kids demand. The kids need to be educated about the needs and wants and this will give them an idea how to spend wisely. The spending on the wants can be reduced which will develop their habits to think before spending. This will reduce the debt crisis when they grow up. Many youngsters are stuck in debt because they spend too much on luxury items.
- 4 basic money jars
Basically, there are 4 basic money jars. Spend, share, save and invest. The 4 basic jars can give the kids a rough idea how they should allocate their monies when they are given some allowances. They need to understand that they cannot spend all their monies and it is important for them to share some monies to people who are unfortunate. We need to let the kids know the importance of saving and investing for the future. We have only limited time to work if we want to retire at the age of 55. If we don’t save money, we need to work forever. We also need to let the kids know that the value of money will shrink every year due to inflation. With the low saving interest rate, we will be losing a lot of money value without investing.
- Spending and investing
Kids should be taught about the concept of delayed gratification. We need to tell the kids that if we spend too much to get instant enjoyment, we need to work harder and harder for the future. They need to understand the concept to invest for a longer duration to see the delayed benefits. Even though they cannot enjoy now, their life will be easier at the later stage. Researches show that people admit the reason why they cannot save is because they spent a lot on lifestyle including shopping and entertainment. If the kids can appreciate the concept of delayed gratification, they are more likely to resist the temptation for excess shopping and be able to save more to secure better financial future.
Let’s use the 5 financial concepts above to teach our kids to create a better generation in the future! Read the full blog here and watch the Youtube video here on this topic.
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