Goal setting an important money skill for kids
Goal setting is great when you're a grownup, but it's not exactly a kid-friendly concept. So how can children grasp what it's all about when it comes to learning smart money habits that will last them a lifetime? Like Donald Trump collecting skyscrapers, it's all about motivation.
"When a child sets a goal they're excited to achieve, they're more likely to take the steps necessary to reach that goal -- as opposed to parents setting a goal they want their child to achieve," says Nancy Phillips, founder and president of DollarSmartKids Enterprises and creator of the Zela Wela Kids financial story-book series.
"That kind of opportunity creates the inspiration to take action. There must be enough motivation present for the child or young adult to feel they can achieve what they want, what matters to them. After this realization, they will be interested in knowing how to get started and what steps to take.
Once the goal is achieved a "cycle of success" begins, Phillips says, that links a child's actions to desired results.
'This gives them confidence, which motivates even greater action. The hands-on experience combined with the emotion involved creates a powerful learning experience that will be memorable and a valuable foundation for future lessons," she says.
In other words, teach your child how to save for the toy they can't wait to play with, and that accomplishment will stick with them for when they want to buy a new car or a home.
Here are Phillips's tips on how to help kids successfully set financial goals:
Help your child set clear, specific aims. Avoid too many at once or it can be overwhelming.
Have your child choose the date when he/she wants to achieve their goal (this may take some discussion and planning)
Brainstorm with them about the first steps they could take to get started. Record the key points for reference.
"Tell them not to worry if they don't know all the steps," Phillips says. "The steps will become clearer as the child takes action and progresses forward. Kids will begin to ask themselves, 'What can I do to get closer to my goal?' This directly relates to how they begin to make decisions around how to manage their money."
Have them plan to do one small thing each day (or each week if that's more manageable) that will move them closer to their goal.
Celebrate achievements and talk about why it was such a great accomplishment.
The Zela Wela website has a tool called the Steps to Success Mountain available for free download that allows kids to track their progress. "Each step celebrated gives them more confidence and motivation to continue," Phillips says.
If a goal isn't reached as planned, parents can help their kids look at ways to approach it differently and problem-solve to move things in the right direction.
"As children begin to set and achieve their own goals in relation to managing their own money, they learn valuable lessons through their successes and failures, lessons that will help them learn about what works and what doesn't," Phillips explains.
"This experiential learning is powerful and will benefit them greatly in the years ahead as they make bigger and more significant financial decisions."
Setting attainable goals early in life helps set kids on the road to financial independence. Learning to save, for instance, helps develop self-control, which is an invaluable skill once credit cards enter a person's life.
"If a child or teen has clearly set money goals that inspire her, she will save, invest, and spend in order to achieve those goals," Phillips notes. "As the child matures and gains more experience making her own financial decisions, her personal responsibility around money management will also develop."