It’s never too early to begin teaching your kids about money. But doing so is not as straightforward as you might assume. Some parents don’t feel confident enough in their own knowledge of financial matters to be comfortable teaching their kids about money.
Teaching children about money equips them with the knowledge and skills they need to manage their money effectively now and in the future. Children who do better with money tend to have parents/carers who talk to them about money and give them responsibility for spending and saving from an early age.
Parents and carers have the most important influence on how children deal with money in adult life. Teaching children about money helps them manage their own finances as they get older. There are lots of age-appropriate ways to do this by keeping it simple and making it fun.
Money Rules For Kids
- Prioritize needs over wants
The first step in teaching kids the value of saving is to help them distinguish between wants and needs. Explain that needs include the basics, such as food, shelter, basic clothing, healthcare, and education
Needs are things that are essential and cannot exist in your daily life. Most needs are fixed, and you can predict how much money you spend from one month to another.
- Practice delayed gratification
Learning how to delay gratification is an important part of money management. It not only helps kids to understand bigger money messages, such as financial choices, interest rates, and debt, but it’s also the basis of financial planning.
- Have fun and enjoy money responsibility
Talking about money isn’t easy. Talking about money with your kids can be even more challenging. Parents can teach their children about money management from a young age in many different ways, which could be fun yet essential for inculcating healthy financial habits in them
- Give back and count your blessings
Counting your blessings is important. It shows that you are grateful. Gratitude is a feeling of appreciation or thanks. When people count their blessings. When we take something for granted, we do not appreciate it. Sometimes we are not appreciative of our good fortune and blessings until they are gone
- Mistakes are good. Learn from them
Making mistakes is a guarantee in life. You can’t avoid them entirely, no matter what you do. What matters more than any blunder or its magnitude is your response afterward
- Before spending, save a portion of your income
To a kid, being told to save without explaining why may seem pointless. Helping children define a savings goal can be a better way to get them motivated. If they know what it is they want to save for, help them break down their goals into manageable bites
- Don’t prioritize money over health, family, etc.
Keeping our priorities straight is a challenge, but it’s essential to prioritize your health. Without a healthy body, everything you’re working for doesn’t mean much. Finances and health are nearly impossible to separate. After all, health care costs money, and making money is a lot simpler when you’re healthy.
- Investing creates more wealth than saving money
Investing has the potential for higher returns than savings accounts, the ability to grow your wealth over time through compounding and reinvestment, and the opportunity to help you achieve long-term financial goals, such as saving for retirement or buying a house
- An abundance mindset is the core of financial success
The mind is a powerful tool and can drastically change how you perform in your career, at school, and in your personal relationships. In fact, some studies show how you think can even have an impact on your immune system. Some might even say what you think is what you are. The power of the mind is one reason why it’s important to have an abundance mindset.
- Create passive income
Passive income is a cash stream that requires little or no daily effort to maintain. This is different from active income, which is generally defined as cash earned from working at a job or as a contractor.
You can create passive income by investing in certain financial products or by starting businesses that, after an initial investment, start to generate income without regular work.
Teaching Kids Cheap Vs Frugal
Parents teach their children how to read, ride a bike and tie their shoes because they know their kids will rely on these important skills throughout life. For exactly the same reason, they should also teach their children how to be frugal.
Lecturing your child to be frugal might not be much better. No matter how many times you explain that turning the lights off after leaving a room will lower the electricity bill, it’s unlikely to get the job done.
- Only cares about the price
- Purchasing decisions are based on the lowest dollar value
- Will take anything that is free even if it will not be used
- Hoards money
- No spending even on things that bring joy
Frugal
- Focuses on Value more than the price
- Considers quality, frequency of use in addition price
- Finds ways to get a bargain
- Mindful spender
- Values time over money
- Not Wasteful
20 Ways To Teach Kids To save
The habit of saving money may be a crucial life skill, but it’s not one that always comes easy. Families can have good and serious reasons why they may fall into this trap, but the savings habit is an important one to help kids establish when they are young
Instead of telling your child that saving money is a good habit, show them why and how. Delaying gratification is one way to show kids the benefits of saving money. Take the money you would use buying a toy that your children beg for at the store and save it for a family vacation several months down the road.
- Price match
- Borrow items
- Shop off-season
- Use points cards
- Buy used Vs new
- Ask for a rain check
- Stick to the shopping list
- How many work hours, the costs of this purchase
- Use Groupon and similar
- Cheap ways to have fun
- Use coupons
- Price compares
- Purchase in bulk
- Wait 48 hours before buying
- Use cash-back cards
- Use work perk programs
- Ask if it’s a need or a want
- Sign up for promo emails
- Join customer perk
- Opportunity costs
Investing Early matters
Investing might not be the first lesson to come to mind if you were building a curriculum around teaching your child to be financially responsible. It also might seem like a more intimidating subject than teaching your child to count or how to build a budget.
However, learning how to invest is a crucial step in building financial responsibility. And teaching investing to a child doesn’t have to be as complicated or as difficult as you might think.
- Include Kids in Financial Conversations
Before you make your child comfortable with the concept of investing money, you’ll first need to make them comfortable with the general concept of money. And that includes simply talking to them about everyday money subjects.
- Explain How Companies Work
Once you’ve covered these fundamental topics, you can move on to how a company works. That means discussing concepts such as revenues, expenses, profits, and cash flows. That probably sounds daunting, and it would be if you tried to explain it to them using boring dictionary definitions
- Keep Your Child’s Attention
Once you have introduced your kids to basic concepts, sit down and let them select a company. If you have the money, buy a few shares in the stock and then check the investment together at least once a week to show how it can rise or fall
- Let Your Child Invest
When your child is older, you can provide a more in-depth explanation of stocks and other investments. Eventually, you want to let a child buy their own stocks. They may have enough cash diligently saved up in a savings account by the time they are interested in investing
12 Money Conversation Starter With Kids
Having great conversations can be one of the best ways to connect with kids. Knowing what to say is one element, but knowing how to continue a conversation and end it on a high note is a skill you can take with you for life
- Is a cell phone a need?
- What are you grateful for?
- Can we live without money?
- Why is it important to save money?
- What is more important than money?
- Why is it important to donate money?
- Is everyone who has a big mansion rich?
- Why do we need to shred important documents?
- What would happen if we didn’t pay our electricity bill?
- What can we do today to make someone’s life better?
- How much money do you want to earn in one day? Why?
- If you were given 1000 shillings, what would you do with it?
Related Content: Savings 101: What Does It Take To Save Money?