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Teaching Children Good Money Habits

Learning healthy money habits at an early age has deep-rooted benefits for your children's future financial success. In addition to helping them understand the concept of money, these habits form the foundation for responsible financial decision-making in the future. In this blog, we will explore how you can instill money management values in your children, with in-depth consideration and practical examples.

Emilio Gučec | Investment academy | 8. December 2023

Pocket Money - a Practical Money School

Giving your kids pocket money is one of the oldest ways to teach proper money management. But beyond the sheer amount of money you give, the philosophy behind it is key. Let's take an example: you give your child a weekly allowance of 10 euros. Instead of it being just "spending money", that moment can be an opportunity to talk with your child about how to plan and allocate that money.

For example, you can ask them questions like, "What do you think you should do with this money?" or "Are you going to spend it now or save it for something special?" Through such dialogue, children will not only understand the value of money, but will also learn about prioritization, planning, and goal setting. This form of interaction helps them develop awareness of how to manage funds wisely, along with a sense of responsibility towards their own finances.

Encourage Children to Set Goals

Goal setting is a key financial skill that helps children develop savings habits. Some children, for example, want to save for their favorite toy, books, or even ice cream every Friday. Take saving for your favorite comic book as an example. A child can set a goal to save 15 euros to buy that comic book.

Every time he gets pocket money, the kid can put part of the money in the box or deposit it into a special savings account to gradually achieve his goal. Through this process, the child not only learns the importance of saving but also develops qualities such as patience and discipline. In addition to creating financial responsibility, setting goals helps children understand the value of money and encourages them to plan and organize their savings. Through these early financial lessons, children gain fundamental skills that will be useful in the future.

Learning Through Social Games and Parent Examples

Board games, such as Monopoly, are often a favorite choice for entertaining the whole family, but they also provide a significant opportunity to learn the basics of financial literacy, especially for the youngest members. In Monopoly, players face the challenge of running their own "financial empire" where every decision has consequences for their assets and wallet. However, it is crucial to recognize that the process of learning about finances does not stop within the framework of the game.

Through games like Monopoly, children learn the importance of planning, strategy, and resource management, and the picture above reminds us of the importance of making wise financial decisions in real life. Understanding the value of money becomes real through their decisions in the game. Parents and guardians have an important role in extending these lessons through everyday situations.

Real life brings much more complex financial challenges, but the foundations laid through games can serve as a great starting point. Education about finances should be a continuous process, adapted to the developmental level of the child. Also, it is important to encourage conversations about money, spending, and saving within the family, empowering children to make informed financial decisions when they grow up.

Open a Savings Account for Them

When your child reaches a certain level of maturity, it's time to consider opening a savings account in their name. This step will allow them to gain a basic understanding of keeping a financial account, how to deposit money, and how to track their finances. With your support, you can go through the process of opening an account together, which will encourage your child to think about long-term savings, as they will see their money grow over time.

For example, you can go through all the steps of opening a savings account together, providing them with guidance and explanations. Through experience, the child will gradually understand that every time money is deposited into the account, that amount grows. This process will help them build important knowledge about how saving works and how to manage their own finances in the long term. In addition, they will understand how small contributions over time can result in significant financial progress.

Do not hesitate and open an account for your child today

Teach Them the Power of Patience

Children often want things immediately, but it's important to teach them how to delay gratification for a greater reward in the future. Let's take planning a family trip as an example. Instead of immediately setting aside money for the trip, it is important to involve the children in the process of setting goals and encourage them to cooperate in saving over the coming months to jointly finance the desired trip.

Through a family savings plan, you can determine together how much everyone contributes according to their means. This process not only teaches children the value of patience, but also encourages them to cooperate, work as a team, and understand the importance of goal setting. By learning to delay instant gratification, children will understand that effort and teamwork pay off, encouraging responsibility, planning, and long-term thinking.

Consider Matching Their Contributions

For you as a parent, there is an interesting way you can encourage your child to save through the system of "matching" children's savings contributions. In particular, if your kids set aside a certain amount every week, say 5 euros, you can promise them to add the same amount to their savings accounts, provided they keep making their contributions. This approach has several advantages.

First, it encourages them to save regularly. The child will understand the importance of consistency in saving, having the opportunity to see the growth of his savings amount each week. This form of consistency can become a positive financial pattern for the future.

Second, this model encourages responsibility regarding their financial goals. By allowing them to determine how much they want to save, you encourage them to think about their goals and desires. Additionally, the promise of an additional contribution on your part is a reward for their efforts and an indication that you appreciate their savings efforts.

Focus on Long-Term Savings

As your children get older, it's time to start talking about long-term financial goals. For example, when they reach high school age, you can plan together to save for their college education. Through this process, children will learn how to create long-term plans and stick to financial goals, which will benefit them in their future lives.

For instance, together with your child, you can look at all the colleges that interest him and work on a plan to collect the necessary amount of money. This can include savings from pocket money, part-time jobs, or contributions from parents. This exercise allows children to develop financial responsibility and understand how long-term savings can help achieve big goals.

Learning the importance of money management in childhood is not only an educational experience but also a key investment in your children's future financial success. Through practice and practical examples, you can help your children develop healthy financial habits that will serve them throughout their lives. In addition to helping them understand the value of money, this activity also builds a sense of responsibility and independence in children, giving them the tools they need to successfully manage their wealth in the future.

Open a child account for a better future

Foundation of Our Little Ones' Successful Financial Future

Strengthening children's financial literacy is a key step towards their future success in money management. Giving pocket money is not just the act of handing over a sum of money; it's an opportunity to lay the foundation for healthy financial habits. The philosophy behind the act is more important than the amount.

Talking to the child about the money received becomes a key moment for teaching important financial lessons. Instead of money being just a means of spending, parents have the opportunity to encourage dialogue about the planning and allocation of funds . Asking questions like "How do you plan to distribute this money?" enables the child to develop an understanding of the importance of financial planning.

Introducing kids to the world of goal setting is a key financial skill. Through the process of saving for a specific goal, children not only learn the importance of saving, but also develop patience and discipline. Opening a dialogue about family finances provides children with an insight into the complexities of financial management, teaching them to prioritize expenses and save for both expected events and unexpected emergencies.

Parents are a key role model in real life. Consistency in financial decisions is important because children often imitate their parents. Opening a savings account with your child is not only a step towards financial responsibility, but also an opportunity to learn about keeping accounts and monitoring your funds.

Learning the power of patience is a lifelong exercise. Children often want instant gratification, but parents can teach them to delay gratification for greater rewards in the future. Planning family trips through a joint savings plan encourages children to value work and cooperation towards achieving common goals.

As children get older, it's important to guide them toward long-term goals like saving for college. Creating awareness about how long-term savings contribute to achieving big goals is a significant step in preparing children for the future.

Emilio Gučec
Emilio Gučec
Business analyst
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