The critical money lessons to teach your kids
Like most people, when I was a kid I wasn’t taught explicitly that money was used to buy the things I wanted or needed. I learnt this lesson as I witnessed my parents spending money at the shops and restaurants as I grew up. I wouldn’t have got very far in life if I hadn’t quickly learnt that lesson. Without any guidance people grow up knowing this one and only lesson about how to use money.
“Money = Spending”
The issue is that just learning this lesson alone can be dangerous. It means our default money habit is a ’spending habit’. A spending habit leads to people using all their money to buy things as soon as they have any. This leads to people getting into financial trouble as they spend their way into debt using loans and credit cards. A spending habit is why so many young adults today have less than £1,000 to their name and it’s why money is the number one cause of stress. Our kids’ future financial wellbeing will be determined by the money habits they form. Therefore we must teach them not to just have a ‘spending habit’. Making sure our kids know the other uses of money We need to make our kids aware that money has other uses from a young age. If they learn the other uses of money then they are much more likely to have a more secure and healthier financial future. The three main uses of money and why they are so important: 1️⃣ Spend it - if they ONLY learn this then there are potential issues which may arise later in life 2️⃣ Save it - if they know this then they are likely to avoid many financial mistakes 3️⃣ Grow it - the secret to achieving financial security Save it This is teaching our kids that money can be saved to spend later rather than to spend right now. Whilst this sounds simple and obvious, this needs to be taught explicitly to our kids. If they don’t learn this then they are unlikely to just pick it up naturally. Talk to them about saving some of their money and then try and help them form the habit of saving to spend later. Get them to think of something they want and get them to save up for it over a period of time. Getting them to delay their gratification will not only help them financially, it will also help in terms of work and relationships. For more information on how to teach your kids about ‘saving money to spend later’ and delayed gratification then please read this blog - Link. Kids who learn about saving money and form a savings habit are much less likely to go into debt and are more likely to have an emergency fund. Both of these will help improve your kids’ future financial wellbeing. Grow it This is something most people completely ignore when it comes to money. Especially now that interest rates are so low. However, teaching your kids that money can be used to grow more money really is the secret to achieving financial security. If you ask the people who have wealth, they will say that they use their money to help them make more money. Help your kids make a habit of saving at least 10% of their money to grow over the long-term. 10% is small enough that they will still have sufficient money left to spend and enjoy but it is also large enough that over time it will make a difference. When they are young, it’s more about them forming the habit rather than the actual amount they save. I really do believe this is such an important lesson. Here is the first ever Blue Tree video where I set out a story you can use to help teach your kids about how money can grow.
For more information on how to teach your kids about saving money to make money then please read this blog - Link. With interest rates so low, parents should consider investing their kids savings so they can see their money grow over the long-term. If you are new to investing then please read this blog to help you build the confidence to invest for yourself and your kids - Link. Last word “Don’t leave your kids money habits to chance - Teach them all the uses of money!” It is super important that parents have explicit conversations with their kids about the uses of money. Whilst the uses might seem obvious to you, if you don’t teach them then your kids may never learn about saving and growing money, which means they just learn to spend. Just spending has so many financial dangers. Helping your kids form a savings mindset will give them so many advantages in life from a financial wellbeing perspective. If they learn that money can grow and form a habit of putting money aside to grow then they really will become Financial Superheroes! For the avoidance of doubt, saving and growing money should be to complement spending. Spending is a major part of using money and always will be. The key is to get a balance. To help your kids form good money habits we are working on the ‘Blue Tree Habit Maker’. Keep an eye out for more details on this as development progresses - subscribe. Thank you for reading! Will