There is any number of experts to tell you that children need to be weaned from their instant gratification mindset if they are ever to succeed financially. While that may or may not be the case, it is certainly true that some sound financial lessons early in life can hold our youngsters in good stead for many years.
AMP financial planner and mother-of-two, Dianne Charman, suggests a few simple but valuable lessons we can all teach our kids.
Encouraging young children to save”¦
“A good starting point is to buy your kids a translucent piggy bank, so they can watch their money grow,” says Ms Charman. “If they’re saving for a toy, cut a picture out of a catalogue and stick it on their wall, as a visual reminder of their saving goal. Also, talk with your children about what big-ticket items the family is saving for, such as a holiday. Young children are instant gratification junkies, but by encouraging them to save for a bigger item, rather than knick-knacks that may end up in the rubbish bin after five minutes, they will learn the value of saving.
Ms Charman suggests a fun lesson, based on the Stanford marshmallow experiment:
- Offer your child a small chocolate or lolly on a plate.
- Tell them that they can either eat the one sweet now or wait until you come back into the room and be given an extra one as a reward for their patience.
- Leave the room for ten minutes.
- Return to the room and give your child another sweet if they had enough willpower to wait! It’s a great first lesson in delayed gratification.
The concept of donating”¦
“Some parents feel it’s important to encourage their kids to donate some of their earnings to a charity, but it really is a personal decision,” says Ms Charman. “I hold money savvy kids workshops in the community and we talk about the concept of donating. One of the benefits of donating is that it helps children learn compassion for those who are less fortunate. As children get older they can also donate their time by taking part in community work.”
The concept of opportunity cost”¦
Opportunity cost ““ that is, the cost of items or opportunities that must be relinquished in order to buy a different item or experience ““ is a difficult concept for many adults to grasp, let alone our children! Nevertheless opportunity cost decisions are something that that each of us must make every day.
When it comes to teaching our kids about opportunity cost, the lessons should be simple and Ms Charman suggests that the key is in talking to your children about their choices before they buy. “For example, if they have only ten dollars to spend and they’re planning to buy a LEGO Minifigure, then they won’t be able to buy a packet of PokÃ©mon cards,” she says.
Simple lessons, which could make a world of difference to your children’s money habits down the track!