As kids, we learned very little about money in school; in fact, what we knew about it was limited to mere mathematics and economics, and it took a while for us to understand money management.
Thankfully, times are changing, and we understand the importance of instilling financial literacy in children to make them competent adults. As parents, we are keen to teach our children about money management so they will be better equipped to handle money as they grow up. Otherwise, they may take years to figure out how to manage money efficiently. Money management in and of itself is a vast and abstract field, but the earlier you start teaching your kids about it, the better it is for their financial future.
Let’s look at ways to instill healthy money management habits in your children. It’s about time we raise kids who know more than just what their little piggy bank holds!
Instill the Value of Money from a Young Age
The earlier you start talking about money management, the better it is for your child – and yourself. Set the stage early by giving them a chance to earn money by giving them extra chores in addition to their regular responsibilities. Older kids can also be encouraged to get a part-time or cummer job. This way, they will understand that money doesn’t just come to them out of nowhere but that they must work for it. As a result, they will value it more and spend it smartly!
Money Is More than Just Coins
Making kids recognize coins is easy, but teaching them how to manage them is challenging. Start by helping them to understand numbers and their values. Moreover, teach them not just to count money but also to look at paper bills so they know where money goes when spending. This way, they will be more aware of spending money.
Parents typically give their children a set amount as an allowance; at some point, they will want to buy things that exceed what they receive. This is an excellent time to encourage them to save money to purchase what they want. It also teaches them about delayed gratification and trade-offs. You can suggest that they make a routine of allocating a small portion of every allowance they get as savings to be used later.
Introduce Them to The Concept Of Investing
Teach your kids that allowing money to sit in their piggy bank is not the smartest thing. Instead, money needs to grow, so introduce them to investing and how they can save up money until they have enough to invest in something worthwhile that will offer excellent returns in the future.
Money Should Never Come Ahead Of Family
While teaching kids the value of money is essential, it has to be done while encouraging a healthy balance between money and life. When money becomes the most important thing, kids can often go to any lengths to get money, even if it means resorting to stealing. That is why kids need to be taught that money isn’t everything. Emphasize the importance of having good qualities, a caring attitude, and being helpful to others.
Have ‘”Money Talks”
Money is a practical tool, so be open about what money is used for, how it can be earned, and how much items cost. Children are naturally curious, so they may have many questions about money. Use every opportunity to teach them about earning, spending, and saving. For example, you can take your child to the grocery store and tell them how to choose what to buy or why you use a coupon to get discounts. You can give older children a monthly budget to purchase their own items like hygiene and school supplies. Little lessons like these can help establish a positive money mindset in children.
Talk About Needs vs. Wants
Be open about discussing how money should be spent – not extravagantly nor sparingly, but as much as necessary. One real life example you can demonstrate is by getting your child to come with you to the supermarket. You can show them how it’s important to purchase essential items like the bread, milk, and eggs before getting toys or candy. You can also involve older children in setting a budget and picking the items you should buy. This helps them understand the importance of spending money on what is essential before spending on the “fun stuff.”
Encourage Them to Spend On Others
If your child has started earning some pocket money, encourage them to help others through charitable giving. This could be in the form of cash, food, clothes, or volunteering. You can encourage them to donate a small portion of their allowance to a charity of their liking. The key is instilling in them the joy of sharing and how rewarding it feels.
Get Your Child Involved In Financial Planning
Allow your children to see how you plan your monthly budget, pay the bills, plan vacations, etc. Talk to them about making affordable choices and involve them in the decision-making process. Make sure to listen to their input and try and incorporate their ideas in your financial plans whenever possible. Most importantly, make sure to set a family goal that everyone can work and contribute towards!
Set a Good Example
Remember, kids are like sponges; they grow up watching everything you do. So, if you are mindful about money, they will notice it. When you set a good example, they will emulate you and want to instill it in themselves as well. Since children learn a lot about money management by watching their parents, you should carefully examine your own attitude towards money first!
Kids develop financial habits far earlier than we tend to think, which is why it is so vital that we teach them smart ways to save and spend money so they are equipped with smart money management skills for life. Take yourself, for example – how you manage your finances has a lot to do with being raised to think about money. So when you help your child to develop crucial money management skills from a young age, you’re helping to make their future financially more secure!