One way to help children and young people build a healthy relationship with money and set them up for financial success is to talk to them about finances from a young age. Introducing the topic of money early and often will help children and young adults to build financial literacy and become more open to saving and investing. But why is learning about cash early so important? Let’s explore the answers in a little more detail.
It Nurtures Their Curiosity
We try to encourage children’s curiosity from a very young age, but quite often this doesn’t extend to the subject of money. Even today, many people prefer to keep the details of their finances private and would rather not discuss this topic with their children. However, at some point, your children will have to deal with money whether that’s learning how basic transactions work, how to spend their first paycheck, or getting into the habit of saving for things that they want. The earlier you can introduce them to cash and how it works, the more likely it is that their natural curiosity will kick in and lead to them wanting to learn more.
It Increases Their Financial Literacy
Even the youngest kids want to know money works. Setting them up for a positive relationship with cash can start at a very young age simply by teaching them about how much things cost. As the child grows, you can build on their knowledge by teaching them about the differences between saving for an item versus going into debt to buy it.
Older teenagers who are about to embark on a college course will need a basic understanding of how to create a budget and how to manage their capital. Plus, they’ll need to understand the implications and future commitment that comes with taking out student loans. When the child becomes an adult and starts their first job, more in-depth topics can be introduced, such as how compound interest can help to grow savings, why it’s a good idea to open a 401(k) or Roth ISA and the best ways to invest to see your money grow. As we know, financial literacy doesn’t come overnight, and you may need the help of an advisor to explain some aspects of investments and to give advice, especially when it comes to making big decisions.
When it comes to putting money into real estate, there are many things to be taken into consideration. It’s not smart to invest in real estate without first looking at the numbers. The savviest investors will use a pro forma real estate strategy to analyze a property to decide whether to invest or not. It’s the best way to provide a good indication of the costs incurred to acquire, operate, and dispose of assets. The point is, that the sooner we start teaching our children about finances, the easier it will be for them to understand wealth and the positive impact that sound economic decisions can make on their lives.
It Instills Good Habits and Confidence
When you open discussions about finance with your children when they’re young, you’ll not only validate their natural curiosity and excitement about money, but you’ll help them to build good monetary habits from an early age. All children love to watch their savings grow in a piggy bank or app. In addition, reducing the stress that often surrounds money will reduce the likelihood of them attaching negative connotations to cash as they grow up. If they feel confident with handling it, they’re more likely to feel in control and be able to make positive and valuable economic decisions.