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As a parent, you want to do everything possible to ensure that your children have a bright and secure future.
You educate them on how to survive and, more significantly, live a good life.
And, more often than not, the money handling is skipped for good or left to be learned later when it should be a top priority right from a young age!
Why? Because even if you don't teach your children about money, they will learn it somehow. So, you should provide them with accurate information.
Give your children the gift of financial literacy from an early age if you want to play a vital role in influencing their sentiments, thoughts, and beliefs regarding money.
Here’s how you can do it:
Help Them Get On The Path: Start With The Basics!
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“It is quite difficult to succeed in life without a working knowledge and understanding of money!” - Sam X Renick
However, you can’t expect a little kid to digest all that important yet complicated knowledge.
But you can’ take the risk of leaving your child to understand the value of money on its own.
For instance, recently, a viral video about a kid ordering food was circulating all over the web. So here is a breakdown of lessons the kid got from it:
1. One-Click Spending!
A little kid used his dad’s credit card to pay for the pizza he ordered online.
Of course, he didn’t know the whole online banking and convenient purchasing concept, but he must have seen his dad doing the same thing.
He picked up the habit and decided, “Oh, it’s easy. Ordering food just needs a click!”
2. I Don’t Own The Money, But I Can Still Use It!
At first glance, the video seems like a cute, fun activity from the kid’s perspective. But, if you really look into it, it’s more than that.
- He didn’t know that he needed to ask his dad for the purchase
- He had no idea how much was he spending but still spent it
So, when we say "start with the basics," we refer to the above scenario.
Surely, the purchase was not more than even $50, but it could have been!
The situation could have been avoided only if the child knew how the money worked! So, even if your kid is 4 or 5 years old, he still needs to know about healthy money habits.
Let's look at a few that you could teach your kids:
1. Separate Good Money & Bad Money
In light of the viral video, you must talk with your kids about good and bad money.
- If they use a credit card under your name for their impulse purchasing - that’s bad money!
- If they ask you to buy something for them because they don’t have the finance yet - that’s good money!
Of course, the concept of money being good or bad changes depending on how you decide to use it.
Bonus: Click to read a comprehensive guide to adapt some household habits to save money.
2. Regular Financial Responsibility
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As per the PBO’s study, most adults develop money habits right from the age of seven, making it more important to teach kids about the value of money.
Commonly, kids are first introduced to money management in the form of piggy banks or saving jars. Secondly, as fun games like monopoly.
You can teach them the basics like savings, spending, investment, and earnings while doing all those activities.
- You can set up jars by labeling them as Don’t Use, Share, and Spend Now for kids to understand easily.
- For instance, you can give your child a $10 allowance for a week and teach him to put something in all three jars.
- So, the next time he asks for something, ask him to take money from the ‘Spend Now’ jar.
- Or, if your relative's kids are visiting, urge him to buy sweets from the ‘Sharing’ jar.
- Ensure that your kids understand that the ‘Don’t Use’ money is off-limits for any regular purchasing.
You can then use the saved money to put in the kids’ accounts in the future.
According to Forbes, opening a child's savings account can teach your child about banking, money management, and short-term/long-term goals and help him become financially responsible at an early age.
3. Controlled Impulse Buying
Little kids tend to have everything pretty and flashy they see in stores. That’s why retailers put extra effort into making their toys cute and interesting.
However, some kids stick to impulse buying even when they grow old into pre-teens and teens. Here are some tips to help:
● Ask your kid to budget his needs:
Yes, even if your child is 6 years old, you have to make sure he or she understands the concept of budgeting.
If you’re going to the mart and your kids insist on tagging along.
Ask them nicely what their demands are and write it down before going out because they will see so much sparkly and flashy stuff in the mart.
● Set A Buying Limit & Period
Research by Medium explains that you must encourage your children to make their own shopping lists and calculate how much money they will need when you take them shopping.
Give them the exact amount when you go out.
You can also set days or time limits when they can shop again after buying a toy or candy. For instance, you just bought a water gun toy for them. Give a week or more gap for their next toy.
4. Weekly Money Talks!
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The financial grooming of your kids must start from their safe place, home!
Yet the majority of teens learn about finances, money management, and anything about handling their spending from friends or social media.
- According to a kid's money survey, nearly half of parents shared that they missed chances to communicate about money and personal finances with their children.
- A quarter of parents stated they are very hesitant or extremely cautious about discussing money management with their children.
- On the other hand, children are eager for their parents to impart their knowledge of money and life.
- Half of the kids questioned believed their parents should have educated them more about money than the internet.
So, it all falls down to the lack of communication between the parents and kids about money and finances.
Once they’ve reached the talking stage, talk to them about plastic cash, credit cards, credit report and score, financial health, budgeting, investments, and anything money in general.
FAQs
Let’s read answers to some commonly asked questions by the struggling parents:
1. What’s the right time for money talk with your kids?
The simple answer is: NOW!
Your children can understand basic money concepts by the age of three. In fact, many of their money habits are formed by the age of seven.
However, that isn't to say you should drop the complicated knowledge bomb right after first grade. Instead, Instead, gradually introduce money lessons into their daily lives.
2. How To Teach Value Of Money To My 9 Years Old Kid?
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There are various ways to help your children understand the value of money. Here are some of them:
- Use a clear jar or money bank to save coins
- Set an example from your life by avoiding impulse purchasing
- Give them gift money for doing good deeds
- Teach them patience by setting money spending limits (even for toys)
The key is to show them how money-saving and spending work by giving them examples rather than lectures.
3. Why Is It Important To Teach Children About Money?
Raising your children to be financially savvy is an important life skill.
As a parent, you can greatly influence your child's financial behavior as you’re the first example they will learn from.
So, begin early by demonstrating to them:
- You need to earn money to use it
- Effective budgeting is necessary to live comfortably
- How to spend money wisely
- You must establish short-term and long-term money goals
Bonus: Click to watch a fun video by Mocomi Kids with your little ones to help them understand financial responsibility in their language.
Bottom Line
Knowledge of money is evident for kids and adults to live their life to their heart’s content. However, many parents are not assisting their children in becoming financially literate.
Whether or not you discuss your financial decisions with your children, they absorb your behaviors like a sponge.
Saving, spending, and sharing are concepts that even young children can grasp.
So, the sooner you get used to discussing money, the better. Otherwise, your kids might look up online or pick up terrible money habits from someone else! And you never know how bad it can be for their financial health.
