It is fairly common for people to believe that you have to be a big shot business owner or somebody famous to have lots of money. However, surveys show that most millionaires today are normal every day people who worked hard, spent frugally, saved and invested well.
I am of the premise that the sooner children learn the principles of managing money wisely the better their chances of amassing a small fortune. So what are the most important things young people need to know about money? Depending on who you ask, this list could get rather lengthy, but I will share the top 7 things I feel children need to be taught in order to do well financially.
1. Teach children to save more than they spend. Money spent on "wants" should not exceed the amount of money saved. For example, if allowance is $10 per week and your child want to buy an item for $8, explain to them that they really can afford it because they would only be saving $2. But if they hold off for one more week they will have a total of $20, then they can spend $8 and still have $12 in their pocket.
2. Teach children to pay their tithes. It an important spiritual principal to live by, but it also provides them a sense of obligation. It is important to instill that money has to be used for all sorts of things, not just the things they want to buy. As adults, we know from experience all of the financial obligations that awaits them.
3. Teach children the principle of money earning money. Open up a savings account for them to deposit their allowance into. When the bank statement arrives explain earned interest and point out that there is more money in the account now than what they originally deposited. Once they grasp the concept of earning interest introduce them to more sophisticated ways of getting a return on their money.
4. Teach children how to earn extra money. If their regular allowance is based on a specific set of chores, from time to time throw in a special project and reward them with some extra cash for doing it. This will teach them that when you do more than the normal workload it results in receiving a little more. Later in life, this may translate into them seeking opportunities to work overtime or take on part time side jobs to earn a little extra cash.
5. Teach children that money is all around us. This will help them develop an entrepreneurial mindset. There will always be grass that needs cutting, leaves that needs raking, cars that needs washing, the list goes on. Encourage them to be assertive and go out in the neighborhood to try and earn some cash. This way of thinking may start out making $50 or so right now, but as this mindset is cultivated it could produce ideas that generate thousands of dollars later.
6. Teach children to live on a budget. Money should never be spent impulsively. Teach them to keep track of the money they have and what they spend because excessive debt ruins the chances of saving money consistently.
7. Be a good example for children to follow. Show them the family budget, how to pay bills and how to write a list before going to the store. All of these things can help build their financial IQ.
I cannot promise that these 7 things will make your child a millionaire within their lifetime but they can certainly help get them closer to it.
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