Children have a way of picking up habits from their parents. In fact, children will often imitate their parents' behaviors. Anything from gestures, morals, and language can be repeated by children. Because of this phenomenon, parents should be mindful of their actions and relationships, including with finances. Kids are able to easily pick up on how parents handle and react to personal financial situations. Below are five ways parents can promote a healthy relationship with money in their family.
Parents should use an open communication system when it comes to personal finances. Ensuring that children feel comfortable asking questions and discussing money matters will encourage them to be open and honest. If personal finances aren't regularly communicated, children may start to pick up on the idea that money is a taboo topic and should be avoided. A great way to make sure that your children feel safe and comfortable communicating about money is through a journal. Check out these journal prompts that can help start the discussion about personal finances with your child.
Letting your child shadow you through day-to-day finances is also a great way to teach them about money management. If you’re someone who creates a monthly or weekly budget, have your child be involved in the process. Explain to them how you’re creating your budget and what your goals are for it. If you're trying to teach your child new healthy habits, having an open communication system is the best way to go.
Financial goal setting is a great habit to teach children. By setting financial goals, it can help keep children and parents motivated and on track. Along with setting goals, parents should demonstrate the ability to stay organized with their finances. Keeping track of financial records and paperwork will help parents be able to accomplish their goals easier as well as minimize stress levels. There are many types of financial goals that parents can set. For example, a popular goal is becoming a homeowner. To set this goal, parents will have to ask themselves “how much house can I afford?” They then can start to save some of their money and begin the process of budgeting and planning for a home. Once parents have established a budget, they can begin house hunting.
While this process may be a long one, it's important to include your child as much as possible when working toward these goals. The more exposure to these types of goals, the more prepared they’ll be. Another financial goal may be to save for a child's education. Parents can show their child the budgeting or investing process for long-term savings. Again, working side by side with your child and answering any questions they may have is a great way to teach your child about financial responsibility and goal setting.
Seek Help if Needed
Personal finances can be a difficult topic for any parent. Teaching your child that it's okay to ask for help can help ease the pressure. There's a lot that goes into personal finances such as budgeting, saving, investing, and building credit. Financial coaches are a great resource for parents. These financial professionals can offer guidance and advice regarding any area of personal finances. Parents may want to invest for their child's future and this is where a financial professional can help. Consider utilizing an investment advisor for guidance on how to create an investment strategy. Showing your child that there are financial resources available is a great lesson to learn.
Learn From Past Mistakes
Another positive money lesson to demonstrate to your children is how to learn from your mistakes. Personal finances can take some trial and error and you’re bound to make mistakes along the way. For example, if a parent has struggled with credit cards in their past, they may be extra cautious about them now. Parents can show their children how to build credit and be financially responsible at the same time. Or if a parent has had issues with overspending, they can teach their child different budgeting techniques. These could include the envelope budgeting system or the pen and paper budgeting system. Work side by side with your child to show them the process of creating a budget. Your child will pick up on your ability to stay organized and efficient.
Plan for the Unexpected
Life is unpredictable. Planning ahead is a great way to show your child how to be financially prepared. Starting an emergency fund is a great backup plan to have in place if needed. Emergency funds can be used for any of life's predicaments. This can include home or car repairs, medical expenses, or housing expenses. Knowing that you're prepared financially can help bring you peace of mind. The general rule of thumb is to have around six months to a year of living expenses saved up. Since everyone is different, a comfortable amount will depend on your living situation and expenses. The most important part is that you have a financial cushion to fall back on.
Children are constantly watching and learning from their parents. Making sure that parents demonstrate a strong and healthy relationship with finances will empower them to want to be financially responsible and confident.
Check out finance classes for kids at Outschool.