One of the best and longest-lasting gifts you can give your children, is the knowledge and skills to work with money. In this season of gift giving, think about how to add these 6 skills to your child’s Christmas stocking.
- How to give your money leadership and plan your spending
This skill is about understanding what you really want so that you can avoid impulse buying and be conscious about how you spend your money. The objective is to bring things into your life that are really going to serve you. Giving money leadership, begins with knowing what you want and then putting strategies in place to plan your spending so that you get it. These strategies include setting money aside to invest so that it can grow and work for you; saving money so that you can afford big-expense items; and doing your day-to-day spending consciously on things that add real value to your life.
- Understanding the difference between needs and wants
You don’t want your child growing up to be an adult that always says, “But I need it” whenever they want something. The only true needs we have are the things we need for survival, namely food, shelter and basic clothing. With most things we have a choice.
- How to practice delayed gratification
Delayed gratification simply means that you don’t take a small reward now but rather wait to get something better and bigger later. When it comes to money it means, for instance, saving to buy the shoes you really want instead of settling for a cheap pair now or, worse, taking out a loan to buy the expensive pair. The longer you delay gratification, the more time it gives you to get the money together to pay for it, to decide whether it’s a need or a want, and understand where it fits into your spend planning. When you give yourself time, it settles your emotions and allows you to make conscious decisions. The more you delay gratification, the better you will become at it.
- Understand the difference between saving and investing
Saving is putting away money now with the intention to spend it later on, for instance, a toy or an outing. Investing is getting assets to work for you. It’s money you are not going to spend, but you are going to use the proceeds. Studies have shown that children understand the concept of investing from a much earlier age than what adults think they can.
- Understand what money is
Money is not something that pops out of an ATM; it’s also not a credit card that you wave over a machine. Money is an exchange of value and of energy. This does not only apply to the things we buy in shops or online – it also applies to work. You give your time, expertise and skills and in exchange for that value, you receive money. Money is therefore not just something you hold out your hand for, it’s something you exchange value for.
- Understand when enough is enough
Firstly, money does not define your worthiness as a person. Having money (or not) does not show how good you are, how successful you are or how much you can be loved. Therefore, be careful of using money as a reward system with your children. You can so easily teach them that money is the main measure of their worth. You want your children to understand that they are enough as they are. Secondly, there is enough money and resources in the world for everybody’s needs. The best way to teach your children this, is to encourage them to give some of what they have to others. It’s the most powerful way to understand that there is enough in the world for everyone. Remember that children learn more from our actions than from our words. Therefore, make sure you practice these skills as much as you talk about them.