Teaching children, teens and young adults the value of saving money will enable them to become homeowners at an early age, putting them firmly on the path to wealth creation.
Once they have learnt the basics of earning in order to spend, save, share, and invest wisely, they need to repeat the process over and over.
Earning
The first step in teaching your kids the importance of managing their money is instilling the idea of earning their own money, rather than having it given to them.
To get this point across it’s important not to give your kids money for doing nothing. Pay them for the chores they do around the house, like taking out the dustbins, cleaning their rooms, washing dishes, or mowing the lawn.
Allocating funds
Any time your kids get money you should encourage them to divide it between spending, saving and giving. Discuss what they will do with their money as well as how they could have split their money up differently. Ultimately, though, it should be up to them to decide how to distribute their funds.
Spending
When your child wants something it’s the perfect time to teach them about spending wisely. Instead of them looking to you as the provider of their wants, let them provide their own. Remind them that they have their own money and they can decide if they want to spend it on whatever it is they want.
Saving
You need to encourage your kids to put a portion of their money towards savings each time they get paid for doing chores, or when they receive gifts of money on birthdays or other occasions.
Investing
Once they have saved up a fairly large sum, you should encourage them to invest some of this in suitable investment vehicles, such as unit trusts, or they may be keen to start a small business for which they will need venture capital.
By the time your kids are old enough to earn a living, their money management skills should be well-established and they could perhaps consider investing in property.
Having the necessary money management skills will enable them to save for a deposit, as well as have the necessary discipline to repay a long term mortgage loan.
• Information supplied by Private Property.
