Financial success is a journey that is best started as early as possible. Children are wise and they will easily adapt to your money habits. As early as three they can already understand a little about what purpose money serve. I have a 3 years old daughter who already understands that going shopping means spending money. If you have no money, you can’t get what you want. She fully understands that coins are also money and not something to put in her mouth.

I would mostly use cash when shopping so she sees and gets to fully understand the purchasing process. I am yet to teach her about the mystery behind debit cards. If you give them financial literacy from an early age, you will be shaping their thinking and values about money and they are bound to do well in life. Here are some of the things to do to shape their financial habits,

SMART SPENDING HABIT

Teaching about smart spending is not about holding a child’s hands or shouting about it or punishing them but it is all about creating situations that will make them have no choice but to learn from their personal experience. Personal experience will be their master teacher. For example; start with their allowance, maybe give a week’s allowance, give a lesson on using it wisely as well as explaining the consequences of what will happen if they run out before time. Set rules that will guide them through. They are kids and bound to get excited and fall into a trap by getting too much money at once and that’s completely understandable. Allow them to make mistakes then guide them from their very own mistakes.

For the first few times, you can reasonably bail them out and stop doing it at some point so they can feel how it’s like to overuse their allowance. If they feel it, they won’t want to be in that space again. When they have learned with a week’s allowance then you can take it to 2 weeks and keep increasing to a month using the same strategy.

In the process of all these, you will be teaching them to budget and spend or live within that budget for their Financial success. Be firm about it and do stop bailing them out as hard as it can be for you as well, otherwise they will never learn. Trust me when I say you will thank yourself later because in no time you will have a money-wise child who understands that having money doesn’t equal buying for fun. With personal experience, this method has worked wonders for me and now without my interfering the lesson is being carried through to date.

SHOWCASE YOUR GOOD FINANCIAL HABIT

Be a practical example and consistently practice what you preach. You know they say “kids do what you do, not what you tell them to do”. You can’t tell them to eat a home-cooked meal because is the healthy option while they see you constantly eating takeaways. They will adapt to your good financial behavior as they watch you spend or save. Take them shopping with you and let them see the budget for it and how you stick to it. Never send the wrong message by spending more than you should and preach to them how they must always stick to a budget or spend on unnecessary stuff while you tell them you have no enough money to do other important things. Do not confuse their mind because it is critical for the message to be clear.

SAVING HABIT

The next critical step is to instill the habit of saving money. When you succeed in teaching them smart spending and sticking to a budget when do purchases; now you have to move on to letting them know budgeting is not only about spending but it has to involve saving as well. No child will automatically know about saving because all they see is that money has to be spend in order to eat, to wear clothes and to have things you want. It is natural that when they see money or if they have money they think of sweets, junk food, and toys so it is all about spending and more spending. It is your duty to move on to making them aware that money has to be spent and importantly saved.

Thoroughly teach a child what saving is, why we need to save and how it has to be part of the budget, and that it is an important part of the budget no matter how small that saving can be. Give a lesson on how it can never be ignored or put on hold because the money is too little to save. Encourage their saving habit in a fun way so it can excite them when they do it. Obviously, this will be for very short-term goals like buying toys or funny small things that excite them. This behavior will grow in them later making it easy for them to save for the long term when that time arrives. The biggest lesson here is that they should not save what is left after spending but save first and spend what is left after saving.

INSTILL INVESTING HABIT

They now understand money is not just for spending, so what do we do with the saved one if we are not going to just spend it? These steps can’t be rushed you proceed as the child grows or as according to their level of understanding of what you have instilled already. Teach them how their savings can make them more money, use your knowledge, read books about finances that can help, or go to financial institutions and ask about kid’s investment accounts. It will excite them to know how their money-saving habit can bring them more money. This is a lesson towards helping them build real wealth.

CREATE THE HABIT TO EARN MONEY

A child needs to know that money is earned and not given. Encourage them to put effort into household chores by giving extra to their allowance. When they help you in the house you add to their allowance according to the work done. Be sure you make them aware that they have to do chores in the house and this doesn’t mean they have to get paid before they do them however, they can be paid for outstanding work or as per agreement. Remember to be sure that they fully get that “you can never spend what you don’t have or spend before you actually earn the money.

INSTILL A GIVING HABIT

Caring is sharing and giving is caring. Based on your belief you can have ample ways to show that a giving habit is one of the greatest habits. As they give, they will get see how that affects both them and those that they are giving.

It is a process that can be very easy and you teach different steps as they grow. There will come a time where you have to go deeper into the topic talking about loans, compound interests, credit cards, etc., and how to stay clear of those loans. You just might be surprised when they ask you first while you still thinking they are not yet ready. If you keep the topic as an exciting habit then they will be excited to learn further without you.

**EARLY SMART FINANCIAL HABITS CAN EASILY EQUAL A WEALTHY FUTURE**