October 31, 2013

Parenting Tips: 10 Ways to Empower Your Child with Financial Skills

Earning her first "business" profit

"You have the responsibility to educate your kin [children] about finance. If you don't, no one else will, and they will suffer for it. - Tom Dyson, The Greatest Financial Gift You Can Give to Your Children

I had a great opportunity to give my daughter a teachable moment in finance recently. I have to sell my jewelry creations at an event and she decided to do it with me selling her own creations. It gave her a hard look inside the world of retail and how it is to earn money on her own. My mom gave me this same privilege when I was young and I'm happy that I can do the same for my daughter.

That experience had help me cope and take on the huge responsibility when my parents both decided to work out of the country and I was left to take the role of a parent and the chief financial officer for a family of 6 right when I just turned 18! It was a rough awakening but that experience taught me how to handle money well and wisely. Now that my child is at a teachable age, I want her to learn early so she can do way better than me. I'm off to a good start.

Here are ways you can also empower your children:

Selling her own work and giving part of it to charity

1. Show them the power to make money - First thing we instilled within our daughter is that "money doesn't grow on trees!" and that we have to work hard to make money. This is why we encourage her to tap into her entrepreneurial abilities and give her the freedom to tweak her own "business plans" but with guidance.

2. Money is earned not given on demand - Easy money equals to easily spent. Christmas, birthday and whatnot holidays in monetary gifts easily falls into this category. Though we give our daughter the freedom to spend them as she wish, we also challenge her to spend or save her money wisely. These monies are afterall hard-earned.

3. Work for monetary rewards - To further instill the importance of working hard to earn money, we gave our daughter a lists of tasks with monetary equivalent that she can work on at her own accord. We did not want to strictly enforce it so as to give her the best possible experience in earning her own money at her own pace.

4. Open their own Bank Account - Giving your child their own savings account is a great strategy in creating a good impact on their financial skills. It will encourage them to start saving if they take part in helping build it and see their money growing. It will also give them a great option as to where their money will go rather than spending it on a whim. My own daughter have one and it always make her stop to think. "Should I deposit it or buy that toy I like?" In her case, deposit have been winning lately.

Handing over her deposit to us ready for the bank

5. Rehabilitate their thinking from the mentality of "Where to Spend it?" - The thing about having money is that when you have it and mostly when you have more than enough, most of us have that urgent tendency of spending the money asap! Un-wisely at most times. It is a childish thinking that our children are very capable of. Get them off of this habit early.

6. Show them the power of budgeting - This is probably the best part of the lesson. Teaching them to budget their money and how to allocate their funds for certain needs and wants reinforces their financial skills. Encourage them to also start documenting how much they spent on a mini-ledger so they can keep track of their spending and how much they took away from their "piggy banks".

7. Teach them Accountability - If they overspend and go beyond their budget and borrowed money from you to cover their deficit, you should make sure they pay you back. This affirms the importance of number (2) and also touches on the concept of debt. Unless, it is a negligible amount and you are comfortable giving it free. Our policy is, anything under a dollar is subject to exceptions.

8- Teach them early - As with anything else, teaching our children early on always makes a huge difference. This is a no-brainer approach that I personally practiced.

9. Be a role model - "Practice what you preach" is a good motto to live by. No matter how hard you want your children to learn if you're doing the opposite, will nothing but null your best efforts.

10.  Get them involve in decision-making - One thing that we learn that works best is to get our daughter involved in decision-making that involves spending money. Like if we are faced with multiple spending for the week, we brainstorm on whether we should spend the money on a particular item now or do it later and why. It teaches her the ability to identify which is important and enhances her skills to prioritize.


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