Understanding how money works is an essential life skill, and knowing how to make your money work for you is just as important. So when do you learn these crucial life skills?
Unfortunately, for a lot of folks, these lessons come later than they should, and often as the result of something going terribly wrong. Not enough people make financial education a priority for children, which results in young adults entering a surprisingly complex financial world without the tools necessary to survive and thrive.
Even if your children are very young, remember that the sooner you start teaching them money and personal finance skills, the more apt they’ll be at applying those skills when the time comes.
Check your attitude
One of the most difficult issues parents have to face is step one – examining your own attitudes about money. This is extremely important because your children learn more from what they see you do than from what you tell them. You can preach to your kids every day that “A penny saved is a penny earned,” or that “A fool and his money are soon parted,” but it won’t do any good if they see that you waste your own money consistently.
Be an open book
It is very important to communicate openly with young kids about money, in simple terms that they can comprehend. Too often, young adults have to learn about credit and debt the hard way: by fending for themselves. It’s better that they learn about personal finances under the guidance and tutelage of someone who’s already been there – their parents.
Involve children in family financial planning
While a young child won’t necessarily understand or appreciate the finer details of budgeting and investing, it can be very helpful to keep them informed of the broad strokes of your family’s financial plan. If you can help them understand that money isn’t limitless and that careful planning is needed for all major (and many minor) spending decisions, that can go a long way towards positively shaping their understanding of personal finance.
Give children a chance to be in control
If you give your child an allowance, let them be in charge of spending it. This is a great way to teach the relationship between their actions and the positive or negative consequences that follow. The key, of course, is to talk about their choices and help them understand why money spent today isn’t available tomorrow. You can also open a savings account in their name and let them make deposits, so they can see the value in building savings.
Provide extra income opportunities
Allowance is nice, but it’s helpful to show children that money is something you earn, not something you are entitled to. Considering offering children opportunities to earn money, rather than just handing it out. This is also a great way to show them the value of hard work and hand off a few of the less unenjoyable household chores.
Take children shopping with you
You can use routine shopping trips as an opportunity to give children a sense of scale when it comes to money, showing them that some things are more expensive than other things. You can also explain to them why you buy the things you do. By showing them the details you take into consideration, you’ll be teaching them how to be a more mindful consumer.