Good financial habits begin at home. With the right mindset, you can help your children to build habits that will positively support them for life.
Covid-19 has changed the way the world operates. With a global recession predicted and personal finances under strain, how you discuss finances at home and what you teach your children today could shape their future financial wellbeing.
According to Jocelyn Black Hodes for Business Insider, how our parents raised us and handled their own finances has had a large impact on the decisions we make as adults. Parents who were frugal, lived large or never spoke about money at all have left lasting impressions – and that was during ‘normal’ times.
Covid-19 is anything but normal. Lockdowns and continued social distancing mean we are all spending more time together at home. Most families will be experiencing some form of financial strain, either because they cannot work from home, they are earning less, or their businesses are under strain. This financial stress will unfortunately be felt at home, whether you are discussing the situation with your children or not.
The good news is that you currently have more time at home with your family to begin a solid financial education. It’s the ideal time to begin to shape good financial habits in a post-Covid-19 world (and hopefully help ease some of the anxiety they might be feeling around the family’s finances at the same time).
Here are five tips to financially educating your children in a positive way:
Teach them about earning
Families are in lockdown at home 24/7 and chores are piling up. This is an ideal time to involve your children in maintaining their own environments.
Teach them about taking responsibility and reward them based on outcomes.
Combine monetary earnings with positive non-monetary reinforcement to build a positive work ethic.
If you are working from home, teach them that earning an income while balancing life and work is positive – do not complain every time you have to work, as this could create a negative impression around work and earning.
Teach them about saving
Children should be taught about saving early on (although it’s never too late to start).
Helping your children to diligently save a portion of their allowance into a savings account paves the way for positive financial habits.
For older children, set up different, linked accounts. Allocate a ‘rainy day fund’ to build the habit of saving for emergencies, a short-term savings account to buy something they really want within the next two to six months, a ‘giving account’, for a charity of their choice, and a current account for spending now.
For younger children, have three clear jars where they can save their money. These jars can be labelled ‘save’, ‘give’ and ‘spend’. It’s important that your children can watch their money grow as they add to the jars.
Help them to understand the power of delayed gratification
This practice of saving teaches children about the benefits of delayed gratification (for example, when they’ve finally saved enough to buy that PlayStation they really wanted).
As we all tighten our belts during Covid-19 and beyond, sound financial advice includes saving for non-essential items, rather than using credit.
Use positive framing
Covid-19 brings with it many anxieties about job security, the ability to pay our bills and what the future holds. Naturally this also creates anxiety over money for families – whether you are openly discussing them or not. Be aware of how you frame these issues for your children, even when you are speaking to your partner.
The beliefs we form as children around money issues can prove to be persistent in adult-life. A ‘lack mentality’ can impede your child’s future-thinking around money, earning and opportunities.
Instead, frame any current financial challenge as ‘temporary’. Focus on how they will be overcome, even if the current circumstances are tough.
This will help your children to see a brighter future beyond your immediate concerns.
Model good behaviours
Remember that your children take their cues from you, and they practice what you do, not necessarily what you say.
Good personal budgeting, savings and responsible management of credit are essential skills that you can bestow on your children.
Discuss your financial choices with them, as well as past mistakes you might have made and how you’ve corrected them.
This is your opportunity to really give them a good start in building their own financial freedom.