Teaching your children the value of money and how to manage finances responsibly from an early age will give them the foundation to live financially well. However, it is not always easy to talk about serious topics and share money matters with your children. Here are a few simple guidelines on how you can financially educate your children:
- Explain to them what a budget is: You do not have to give them all the details about your income and expenses, however it is important for them to understand what a budget is. This includes the basic calculation of Income – Expenses (Fixed Expenses + Changing Expenses) = Remaining Income.
- Share the importance of saving: Make sure that they understand the principle of saving and compound interest. You can even give them a savings box or open a savings account for them to help them to get started.
- Help them to understand what debt is: Explain the different types of loans to them and what it is used for. For example: Home Loans, Personal Loans, Educational Loans, Credit Cards etc. Also, make sure that you explain what interest and a re-payment term is.
- Make sure that they know what insurance is: Insurance might seem complicated, however it is important for children to know that your possessions have to be covered in the event of theft or damage. They also need to know what life insurance and funeral cover are and know where your life file is, should something happen to you and who they should share the information with if they need to access your life file (i.e. a family member or trusted friend).
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