Many people learn to handle their finances through trial and error but your kids shouldn’t have to. If you choose to educate your children about money now, you will help them to avoid a future full of financial hardship and confusion
Here are several ways of teaching kids about money that you can try.
1. Introduce Kids to Money Using Coins
Using coins to introduce young kids to money is a great start. Teach them the value of coins and what makes it valuable. Have them save their coins in a piggy bank and make sure there’s a way for them to see those funds grow. For example, you can use a transparent jar or piggy bank.
2. Share Your Money Blunders
You probably made a lot of mistakes with money in the past. Your kids can benefit from the knowledge gained from those experiences so don’t be afraid to share them. Teaching kids about money in a way they can understand is mostly about sharing stories.
So think about your money errors, the things you should’ve done better, and so on. Then tell the story in a compelling or comprehensible way.
Use terms they can understand and share relatable stories so you’re meeting them at their level. Most kids can understand the concept of growing their money but not all will comprehend stocks and mutual funds.
3. Set a Good Example
Children watch and mimic their parents. Your kids will inevitably pick up those money habits. For instance, they’ll think it’s ok to do the same thing if you’re constantly spending money on crap. Setting a good example for your kids comes down to doing what you preach.
4. Teach Them About Cost
You have to do more than discuss price here. Take money from their piggy bank to buy things whenever they need something other than basic necessities (e.g. food, shelter, etc.). Make sure they see you hand the money over to the business or cashier. This is because showing is often better than telling.
Let your child figure out how much they’ll have to save up to get something whenever there isn’t enough money. This is a great way of illustrating the value of money and it teaches them to be more cautious with spending.
This is also a good opportunity to instill the importance and value of setting goals since they’ll have to save for big purchases. Plus you’ll be teaching them delayed gratification, which is a key component of financial literacy. Consider having three piggy banks. Designate one for charity, one for savings, and one for spending.
5. Let Mistakes Happen
This is a tough one because our first instinct as parents is to protect our children. However, you must let your kids make their own decisions concerning money, even when it means wasting cash. You can still intervene to help them when it makes sense. But, letting some things occur is a valuable way of teaching kids about money.
6. Differentiate Needs vs. Wants
Being unable to understand the difference between wants and needs is one of the reasons many people struggle financially. So this is something you should definitely teach your kids about. Here’s an example of how you may begin the lesson.
You can give away their old things to charity or list them for sale on classifieds like Kijiji whenever they want something new. This will make them think twice about that shiny new thing they want. Plus it’s a good exercise for teaching them that things bought with money hold value.
7. Play Money Games
Board games like Monopoly are fun ways of teaching kids about money. Gather the family together once a week (or more) and play your favorite money-related board games. Financial games simulate how money travels and how it’s created in the real world.
8. Open a Bank Account
Opening a bank account is a useful way of teaching kids about money. Specifically, you should be able to set up a simple checking account when your kids become teenagers. This will expand their knowledge of managing money and prepare them for handling lots more liquid assets in the future.
Also, maybe use this opportunity to open a savings account for their schooling. Give them the responsibility of contributing to their college or university education even if you have another account elsewhere. This will further improve their financial intelligence.
9. Teach Kids About Loans
Your kids will be offered loans like credit cards at some point in their life so teach them about good and bad debt. Teach them why being in debt can be a difficult way to go about life. It’s also important to teach your kids how debt can be used.
While some debt can help make normally expensive goals like a house or car more affordable in the long term, a habit of using debt to finance everyday life can be a crippling practice.
10. Teach Kids How to Budget
Having a budget is how we see where our money is going. Sit with your kids and help them create a sound budget based on their income (e.g. allowance).
Preferably, use a budgeting application since they’ll likely relate to that better than using a spreadsheet. This will get your children in the habit of budgeting, which forces them to think about smart spending.
11. Teach Kids How to Make Money
One of the best ways of teaching kids about money is to help them find a job or start a small entrepreneurial venture. Maybe you have items in your garage that the kids can use for a garage sale. Perhaps, they could get employment in the summer.
Discuss how you make money, share other methods available to them, and let your kids decide which money making route to take.
Start Teaching Kids About Money Now Because…
- Children that learn about money early develop the habit of saving and appreciate the process.
- Teaching kids about money forces them to consider the consequences of their decisions. For example, a child that understands things around the house cost money is more likely to take care of them.
- Teaching kids about money helps them make mistakes now instead of later on in life.
- Money-conscious kids are less likely to suffer the effects of impulse spending during adulthood.
- Financially intelligent children avoid unmanageable debt that often results in a bad credit score during adulthood.
- The knowledge of money can instill work ethic and motivation in kids.
- Teaching kids about money early sets them up for financial success.
Timing is Important When Teaching Kids About Money
Teaching kids about money requires good timing regarding what you teach them and at which stage of their life. The entire process is going to be time-consuming.
However, the time and preparation on your part are well worth it. Considering that you’ll be setting your kids up for success in the future. Plus it’ll be a good learning experience for you and your children.
Teach your kids sound budgeting principles. Instead of letting money rule your life and stress you out, learn what it takes to make your money becomes a source of pleasure.
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