Parents want their children to live a successful and happy life. They send their children to school, impart lessons every step of the way, but sometimes forget one important thing to teach them: financial planning.
Financial education expert Sam X Renick, co-creator of Sammy Rabbit, a children’s character and financial literacy initiative, says, “Without a working knowledge of money, it is extraordinarily difficult to do well in life. Money is central to transacting life, day-in and day-out. Where we live, what we eat, the clothes we wear, the car we drive, health care, education, child-rearing, gift giving, vacations, entertainment, heat, air-conditioning, insurance—you name it, money is involved.”
Here are some money lessons parents can teach their kids from a young age.
1. Set an example.
A study by Cambridge University found that money habits in children are formed by the time they’re seven years old. If they see their parents using credit cards for everything, they won’t learn about the dangers of overspending and debt. If they see their parents arguing about money, this gets imprinted in their minds too. Use cash or debit and be frugal—it’s a lesson they need to see being practiced by their parents.
2. Show them that you’re not buying impulsively.
When children see you overspending on things you don’t need, they will have a hard time realizing that things do cost money and those costs have consequences—like lack of funds when someone falls critically ill. When you’re shopping for clothes and shoes that you don’t need or use, food that spoils in the fridge and is thrown away, they will think that it’s all right for things to go to waste. At the supermarket or mall, buy only the essentials. Teach them how to make a list before leaving the house.
3. Open a savings account under their names and let them handle it.
Kids get monetary gifts from their lolos and lolas on their birthdays, at Christmas and other occasions. Open a bank account under their names and tell them the money goes to their college fund. This is the start of their money management life.
4. Teach them to become entrepreneurs.
A Gallup Poll found out that 40% of 5th to 12th graders in the US plan to start a business. “Students remain optimistic but lack the financial literacy required to compete globally,” according to Gallup.
Teenagers are always asking for money, teach them instead how to make it. During their summer and semestral breaks, don’t let them just hang out with their friends all the time, but help them find a job or figure out how to become an entrepreneur.
The pandemic has made entrepreneurs out of a lot of people during the lockdowns. Food being the top and easier business from home to set up, perhaps they can learn to cook, bake or design packaging. Encourage them to create content online that can be monetized.
5. Tell them why insurance is important.
Being able to understand the value of insurance early on will allow your children to lead a life prepared and with fewer stress and more freedom to enjoy life. With a protected life and wellbeing in mind, it will be easier for them to grasp the importance of responsibility, independence, and self-love.
6. Teach them (and yourself) about the different type of investments.
Even before they are born, you are no doubt already planning for their future. You only want the best for them and FWD Life Insurance’s Babyproof is designed for your babies’ needs every step of the way: from life protection and investment to hospital and ICU allowance should you need it. This plan consists of either Set for Life or Manifest with RecoveryPro and SurePro for Owner.
Obviously, your children don’t have the money to buy real estate, but by the time they’re teenagers they might have enough to participate in the family’s investments. Create a fund where they contribute a percentage—an equal one coming from each child’s savings account—with the parents matching or doubling their contributions. Use this fund to invest.
Looking for an insurance to secure your child’s future? Book an appointment with an FWD financial advisor to learn more, click here.