Being a parent comes with many benefits, but one thing’s for sure; it can be costly. The stress of dealing with a challenging financial situation can be compounded if we have children to raise and constantly worry about their future. Understandably, not all households are made equal, some more financially stable than others, while single parents or single mothers commonly struggle the most. For many full-time mothers with a limited support system, clawing their way out of a bad financial situation can seem futile.
In too many cases, the decision to begin stashing money for their children's future is continuously put off, setting them up for a financially disadvantaged future. Despite the economic state you're in, it's never too early nor too late to start cash stuffing for your children.
A few fundamental details are required to increase the probability of your child having a prosperous future:
1) Teaching them financial literacy
2) Teaching them how to earn, budget, and save money.
3) Providing them with a healthy financial environment that encourages saving and budgeting money.
Talking to your children from a young age about money opens up their minds to better understanding it. A prevalent mistake made by parents is waiting too long to talk to their children about money management, and worse, some don’t do it at all.
To better understand how to create an environment for your children that will set them up for financial success in the future, let’s go over a few tips.
Begin With The Money Talk
Talking about money is considered taboo in the American culture; therefore it can be uncomfortable, but it's an essential part of parenting.
If you're in a financially dire situation and the entire purpose of having the money talk is to divert your children from making the same mistakes you did, the earlier you start, the better. Studies show that routines and habits are fully formed in children by the age of 9. Therefore, if you display a poor relationship with money and your child grows up observing this, the chances of them developing corresponding habits increase.
So have these conversations early on and make them routine in your household. In time, your child will learn to associate money talk with positivity. According to a study from 2019, 82% of parents cite fear as a barrier to talking about finances with kids. Conversations are challenging indeed, but breaking the cycle of poverty or setting your child up for a healthier life than you have, requires education on budgeting and saving money.
Allow Them To Earn and Begin Saving
Children learn by playing, trying new things, and mostly, they love the hands-on experience. Their brains are far more malleable than they are in adulthood, so instill in them the value of money by creating opportunities to earn and save.
An excellent way to do this is by giving them chores and paying them. The more they do, the more they make. But what they do with the money is what matters in this scenario. Some children will ask you to take them to the store to buy their favorite treat after you’ve paid them. Use this opportunity to teach them the difference between saving and spending.
Explain to them that if they save their money for something more meaningful in the future, their work around the house would have more value.
In this situation, you're teaching your child that it's not okay to spend money the moment they earn it, and it's not okay to spend money on impulse items. Guide them on how to preserve their money for long-term savings goals. Teaching kids to work and save prepares them to know the value of money and that building wealth requires less spending and more saving.
Display Healthy Behavior
Suppose you're spending considerable time teaching your child about money and how to earn and save, but you also take your child out shopping and spending money constantly. Since children learn habits from their environment, your child will eventually start mimicking your behavior
You want to take every opportunity to ensure your child is set up with the best environment and tools to succeed. In many cases where children are not taught financial literacy in the household, but if they have a parent(s) who displays a healthy relationship with money, they will adopt the same behavior over time. You should always lead by example.
Teach Your Children About Cash Stuffing
When you're at a point where you start feeling confident that your child understands the fundamentals of money and they have enough money saved, it's an excellent time to incorporate cash stuffing.
The goal with cash stuffing is to achieve two things:
- Teach your child how to organize their cash, so they're not spending their savings.
- Teach your child that the value of money weighs differently for all things in life (stash away a more significant percentage for more essential expenses such as an education fund.)
First, create a budget with your child. You want to highlight spending allowance and saving. This shows them that it's normal to pay yourself first, provided a budget is in place for savings. The budget should only consist of a few categories to give them an idea of the purpose; you don't want to confuse them.
Now you will introduce the cash stuffing method by providing them with enough envelopes to match their categories. The significance of having them use envelopes is to prevent them from overspending because once the envelope is empty, they can't spend anymore. It’s important to note that people tend to overspend from their bank accounts because they lump everything together without appropriate allocation of funds.
To make cash stuffing an exciting project for your child, consider adding envelopes for special occasions or a favorite place to shop.
For example, suppose you created three envelopes, including; education, savings, and favorite store. The purpose of making the education envelope is to teach them how to save for long-term goals early on in life. The purpose of making a savings envelope is to teach your child the importance of saving a percentage of money every time they earn some. These two categories are classed as long-term savings, which can become monotonous for kids. Adding an envelope for their favorite place to shop as a short-term savings goal but is added to create excitement and keep them motivated. You want to keep them interested.
Teaching your children cash stuffing is an excellent lesson in financial literacy. Some parents choose to skip the cash stuffing or envelope system altogether to teach their children to use a bank account. This isn't always the most effective way to teach your children about budgeting and saving because they skip the step that teaches them the proper allocation and diversification of funds, which is what the cash stuffing method centers around. In addition, utilizing the cash stuffing method encourages them to regularly reevaluate budgeted categories when they’re trying to stretch their savings.
Cash Stuffing For Your Childs Future
Teaching your child cash stuffing is an excellent way to secure a better future for them. The cash stuffing method can also benefit single moms trying to find ways to save more for their child's future.
The first thing to do is take inventory of your child's needs and their most significant expenses. For every child you have, create individual budgets based on their short-term and long-term expenses.
For example, going back to school is expensive for all parents, let alone single mothers. Create a budget to save a modest amount of cash for the following school year.
Another example could be if you have a child with ongoing medical needs. Create a budget for any prescriptions they need and total the annual amount. If you need to allocate funds from a different category to this one, that would be wise.
Those are two examples of essential short-term budgeting needs that can be satisfied by using the cash stuffing method. Now we will review an example of a long-term budgeting need for your child.
One of the most significant expenses a parent will have for their child is education costs. It's unnecessary to pay your children's entire tuition, but offering to pay a portion can prevent them from going into steep debt. This can be challenging if you're already on a lean budget with little funds to add, which is why it's important to start as early as possible. The earlier you start putting cash stuffing, the more you can save.
Create a cash stuffing category for education tuition. The best way to determine how much to save each month is to analyze how much money you have remaining. If you don't have much left, examine other categories that can be adjusted for a lesser amount. In addition, you might want to consider omitting a category altogether if it’s not a necessity. By doing this, you're setting aside money to help give your child a promising future.
Life as a single parent can pose extreme challenges when it comes to meeting the financial demands and saving for your child's future. With the right strategies, small but long-lasting changes can be made. The cash stuffing method can help get you on track and is an excellent method for kids to learn about.
