As a parent, you no doubt spend quite a bit of time teaching your children how to interact well with others, demonstrate good manners, be safe, eat properly, and be active, but there’s another area of life that is incredibly important to teach too: finance.
To help your children learn to be responsible with money and set themselves up for a bright future, the lessons need to start from a young age. While this may seem a bit daunting, there are plenty of easy and straightforward ways to teach kids about money at any age. Read on for some tips to instill good money habits in your child today.
Model Good Behavior
The first thing to keep in mind is that children tend to do what their parents do, rather than follow what they say. Kids are very observant, and often pick up and soak in many more actions simply from watching you go about your day than you might realize. This means that in order to help raise money-savvy children, you need to model good behavior.
Ensure you showcase positive financial behaviors and philosophies on a day-to-day basis and you’ll quickly teach your children how to handle money responsibly. This can cover things like shopping to a set weekly or monthly budget, using coupons and discounts to pay less for goods or services, making choices between items to demonstrate the opportunity costs involved, and talking freely (yet positively) about money.
Remember that using the right kind of language can be just as important as your actions. Rather than repeatedly telling your kids that “we can’t afford this” or similar, it is instead better to use phrases such as “our choice is to not spend money on that.” As well, don’t ignore them when they ask questions about finances, as this can be a great way to teach children how to have a healthy money mindset.
Use Cash When Paying for Goods
Another good way to model helpful financial behavior in front of your children is to pay for products and services with cash, rather than credit cards. When you use cash, kids can hold it, help you count it out, and understand that you end up with less than you started with. Using credit cards doesn’t tend to teach them much because plastic payments are abstract, and can mistakenly give kids the belief that such payments are “free.”
It is beneficial to get your children involved in transactions like depositing coins in a parking meter, or buying small items such as the newspaper or a loaf of bread, so that they can more readily see that balances decline when goods or services are purchased. It also helps them to learn how to add up costs and work out what their change should be.
Involve Children in Household Shopping and Budgeting
Similarly, you can help your young ones to learn positive money habits by getting them involved in your weekly shopping expeditions for household goods, and in setting up and maintaining budgets. While regularly taking kids shopping for leisure purposes can set them up for a life of impulse purchases and consumerism, getting them used to weekly supermarket shops and the like can teach them many important lessons.
During visits to grocery shops and other regular haunts, let children take charge of coupons and shopping lists, encourage them to choose which products might be the best value, and use the time as a top opportunity to discuss saving, planning, needs versus wants, and more.
Give Children an Allowance to Budget
Another helpful way to teach your children about money is to actually let them handle and save their own. This typically means giving them a weekly or monthly allowance to budget, but may also involve teaching them to save some of their birthday or Christmas present money.
Guide your children through this process by helping them to set and then achieve financial goals during their formative years. They may start with saving for a special toy or outing when they’re little, and then grow into saving for a car or overseas holiday when they’re teens.
It also pays to introduce your kids to banks or other financial institutions by having their own savings account set up. Let them chat to and meet the bank manager and/or other staff members so that such organizations don’t feel scary or overwhelming and become a natural part of life. Check with local financial institutions to see what special offers they may currently have on children’s accounts, such as free passbooks to make note of deposits, yearly birthday emails listing the interest earned for the year, a free money box, or other goodies that can help reinforce the responsible money mindset.