Parents are often concerned about giving their kids the best education possible. But one of the most crucial life lessons schools and universities fail to teach our children is handling money.
It’s essential to have a strong foundation in managing money to prepare your kids for the real world ahead. With working financial knowledge, kids can grow up to be responsible with money and quickly gain financial stability.
Who better to impart this vital lesson in their lives than you? Parents need to start the “money talk” early on for the habit to stick with their kids. Here are tips you can take to kick-start financial literacy within the household:
Start with the Basics
According to Purdue University psychologists, kids already have a basic idea of money by three. And by age seven, their money habits are already formed. This is a call for parents to start educating their kids about what money is and how it works.
Here are tips on how you can introduce money in fun, easy-to-understand ways:
- Introduce coins and cash. Explain how they are used to buy stuff, like food and groceries.
- Discuss wants versus needs. Kids need to know that some things are more worth spending on. These include basic needs, such as food, clothing, and healthcare. Wants, such as toys and candies, are only for when they have extra cash.
Learning these principles early on will help them spend better in the future.
It’s also crucial to show your kids that money isn’t only for spending—it can also grow. Start instilling a habit of saving. This teaches them the value of security, discipline, and independence.
Little kids can pick up on the importance of saving even by conveying simple messages, such as “I’m glad I saved some money today” or “I love to save.
You can also suggest a simple short-term goal of getting the toy they want. This will teach your kids about delayed gratification, that if they save their money today, they can get the toy they want most later.
Teaching kids to save
There are several ways to encourage our children to save. These include the following:
- Let them use a piggy bank. A better idea is to use a clear jar to store their savings. This will give them a better visual of how their money is growing each time they drop a dime or a dollar. Showing them that you’re proud of their achievement also helps encourage them to save more.
- Get them their own bank account. Saving in an actual bank allows older kids to have a headstart and have money to spend in the future when they need it most. They can even use their savings from childhood for college expenses and avoid student loans.
Practice Smart Spending
Kids need to learn that saving money isn’t only for spending it on the things they want. It’s also important to save for the things they need when they’re older.
Personal finance is all about sound decision-making. As parents, you need to ensure your kids don’t grow up to be big spenders. Yes, they may have saved a significant amount of money, but that doesn’t mean they need to spend it on the first shiny thing they see.
It’s important to teach kids about contentment during the early stages of their childhood. When they see their friends showing off cool gadgets in school, tell them how their old one still works and how they can still spend their money on other more important things. For example, when you’re on a family vacation, let them know that it was made possible because you saved money for it instead of spending it on the latest gadgets.
Create Opportunities to Earn
Another concept of money is to earn it. As parents, you need to be careful about giving your kids money “just because.” Teach them that they need to make it as well.
- Give commissions instead of allowances. Encourage them to do certain household chores or run an errand in exchange for money. This will teach them that money doesn’t fall from the tree.
- Teach them to do business. One way older children can earn and declutter at home is by selling their old stuff. You can even support their small business by getting custom packaging for their products. This will entice more buyers and motivate your kids to grow their business.
Highlight the Value of Giving
Aside from saving and spending, it’s also essential for children to learn about giving. Kids need to understand that giving doesn’t only benefit the receiver but also the giver.
Parents can encourage them to give to their local charities or churches. You can help them find organizations or causes that they want to support. Charity Navigator is a great place to start looking for highly rated and legitimate organizations that help those in need.
Set a Good Example
Kids are known to mimic their parents, including their spending habits! In fact, it’s the number one behavior your children learn from you.
So the last and final tip we have is to mind how you spend money within the household. Whether that’s impulse buying a designer bag or ordering takeouts more often than you should, kids can pick on these habits and apply them as they grow older.
We may not want to admit it, but the tips mentioned above apply to us as well. Start learning these smart money habits together with your kids. You’ll thank yourself for it in the long run!