It’s never too early to know what to teach children about money. All over the world, financial literacy for children is being taken seriously.
Teaching children about money strengthens their ability to effectively understand and use various financial skills, like personal monetary management, savings, and spending, investing, and budgeting.
Financial literacy for kids is part of good parenting.
Why teach kids financial literacy?
It is never too early to teach kids about financial literacy. So having money conversations with your children early can give them a head start and set them up to win with money at any age.
Kids often pay attention more than they think. The more money conversations you have with your children, the more chances they have to learn how to manage their money properly.
Some reasons to start talking to your kids about money when they are young include;
Normalising money conversations
For many parents today, money was a taboo topic when they were growing up. It simply wasn’t something casually discussed around the dinner table.
Many didn’t know how much money their parents made or spent, how much they were saving and investing, or how much money they put away for retirement.
By frequently having age-appropriate money conversations with your children early on, you can create a more open environment for learning and asking questions about finances.
Better financial choices
Having the money talk with kids can help them develop the skills necessary to achieve financial success later in life.
From saving and investing to creating and sticking to a budget, early money lessons can give your kids a leg up when it’s time for them to make more significant financial decisions.
Learning from past money mistakes
You probably have made mistakes managing your money in the past. You can turn those mistakes into something positive by sharing your struggles with your kids and helping them make better choices.
Young kids may not face life-altering financial decisions, but they will as they get older the information they have learnt will guide them through.
Talking about your financial missteps with your kids may help them avoid making them too.
What to teach kids about money
It should not be a difficult task to teach children. If you are lost about what to teach your children about money, the following pointers will guide you.
Practical daily examples
You can use everyday moments to talk about money. It is important to have regular conversations about money management while your child is still young to push them toward positive financial outcomes in early adulthood.
Look for practical daily examples of spending and budgeting and share them with your child.
Wants vs Needs
One vital lesson children need to learn early is to separate their wants from their needs.
Teaching children the difference between needs (such as food, water, shelter, and clothing) and wants (like toys) will help them learn to prioritise their expenditures as they grow.
The power of earning
You can teach your kids the importance of earning their keep by paying them for carrying out unusual tasks.
Consider giving them cash for extra work that they don’t usually do like helping cook dinner, washing the car, or cutting the grass outside.
You can demonstrate the power of compound interest by paying your kids interest in their savings.
Simply put, compound interest is the money you earn on your interest. In other words, your interest is fetching your interest.
Kids, ordinarily, will not save money in a bank but in a piggy bank, or what we call kolo. This does not generate interest.
However, as a parent or guardian, you can demonstrate how interests work and encourage them to save at the same time, by paying them interest on their savings.
The different types of money
There are coins, paper bills, paper checks, and debit and credit cards and you use them all at different times for purchases.
The idea of monetary variety is a hard one to grasp for kids. And there’s also the issue of a current and savings account.
Parents can help their children develop good financial habits by teaching them the difference between a current and savings account and how banks store funds.
Take a trip to the bank as a teaching experience and deposit or cash a cheque.
Give your kids the prices of things they want. Teach them to come up with a combination of things that would fit within their budget.
Even though you make the final decision, children feel more in control and learn the benefits of budgeting as they grow.
Having taught them budgeting, you also have to teach children about discipline and sticking to a budget.
Help the learn to prioritise spending needs and patience if you don’t give in and increase the budget.
Children basically grow up on television even with the most strict adult supervision. There they get to learn consumerism and self-centeredness.
It’s up to you to teach them to give, even the smallest amount, to those who have less. This is a fundamental money lesson that naturally empathetic kids can enjoy.
It’s getting harder and harder for people to be content with what they have. This includes children.
Social media is not even helping matters. It is the quickest way to bring on the comparison trap.
Teaching your children about contentment is one vital lesson that will guide them through life.
Model good financial behaviour
In other words, set an example. You can’t teach children about budgeting one minute and the next minute you are on a shopping spree. This sends mixed messages.
Make sure you model their behaviours around money that you want your children to adopt.
Tips for talking with your kids about money.
Having money conversations early on can go a long way in fostering a healthier environment in your home for financial success.
Here are some tips to get you started talking about money with your kids.
Use everyday situations.
Whether paying your light bill or planning your monthly budget, use everyday tasks as opportunities to share insights, ask questions or even get input on how to spend your money.
Take advantage of technology
Several mobile apps and other resources help teach financial literacy to all ages. We live in a digital world, so why not use it to your advantage to teach your kids about money?
Turn real-life scenarios into games with your children. For instance, the next time you’re at the supermarket, give your child a small budget and let them plan and shop for an entire family meal.
Open a kid’s bank account.
Many banks offer accounts services specifically geared toward children and teens. Most of these joint or custodial accounts come with parental controls and tools that teach financial education. Use a kid’s savings account to help your children set and reach savings goals.
Having the decision to teach your children about money early on will not only help the feel more comfortable discussing finances, but it can also play a pivotal role in helping them become successful, financially responsible adults.
Find ways to incorporate money talks into everyday conversations with your children. Provide a safe and open environment for asking questions, making mistakes, and learning now, to help prepare them for the future.