Warren Buffett once said that it is never too early to start educating your children about money. Even at a very young age, children will be exposed to money. This can range from buying snacks at the school canteen to getting hong baos from family members during Chinese New Year.
Children, therefore, need to start learning the importance of saving and developing good financial habits.
Parents play an essential role in teaching their kids the value of good money habits. In this article, I will describe three ways that parents can teach their children about money.
Make saving fun
There are many ways that parents can encourage money-saving habits. This can be in the form of rewarding them for saving their pocket money or by creating games about saving.
One good way to entice your children to save more is by matching their savings as they save. Parents can also reward children with gifts as they save more.
One method that worked well while I was a child was using a piggy bank. My parents only allowed me to finally count the money that I had saved at the end of the year. The anticipation to have a larger and bigger piggy bank at the end of each year made me want to save more each day.
Use educational apps
In this era of mobile apps, parents can now turn to games and apps online to help their children learn the importance of good money habits. There is a multitude of online games that parents can use to teach their children about money.
For example, Kids Money is an app that helps children create financial goals and helps them keep track of their progress. It also gives the child an estimate of the time it will take to reach the goal based on their saving habits.
Introduce investing concepts
Warren Buffett bought his first share at the age of 12. This propelled him to where he is right now. By learning to invest early, children can take advantage of the compounding effects of their investment.
Parents can start introducing their children to investment by teaching them simple concepts such as stocks, interest rates and returns.
Allowing them to start purchasing stocks of companies that they are familiar with and encouraging them to keep track of their performance is a good start.
At the same time, it is important not to over-complicate investing as that may cause them to lose interest.
The Foolish bottom line
Learning to save and invest early in life can give your children a great first step to their financial well-being. Parents need to play their part in moulding the right mindset among their children. Hopefully, these three tips will be useful for first-time parents who are looking for ways to teach their children about money.
This article is first published on The Motley Fool.