How To Teach Your Kids Important Lessons About Finance By: Christine Weathers
The lessons you impart to your kids now will last them a lifetime. Among the most important ones you must teach them are those related to finance — the value of money, how to use it wisely, and how to save and grow it. Your role in rearing children to become financially savvy adults cannot be emphasized enough. In fact, an Invest in You Savings Survey presented on CNBC found that over 33% of the survey’s respondents looked to their parents as financial role models, with 18% looking up to their mom. If you want to start teaching your kids about money at a young age, here are some tips below to help you get started:
Put some money in their hands
It's normal to feel uneasy about giving your kids money to spend, but financial planner Thomas Henske speaking to CNBC explains that it will help them develop good habits. Henske's reasoning: Kids will only know how to handle money if they get to practice with it. He likens it to a kid wanting to train in tennis, but is without a racket. Don’t be afraid to give your kids some money in the form of an allowance that they can use for personal means. It doesn’t have to be much even $1–$2 per week will help develop good habits.
Explain the value of money
As you observe how your kids use their allowance, give them lessons on the value of money. A feature on 'How to Teach Young Kids About Money so It Sticks with Them' by NBC News notes that you must introduce the relationship between work and money, then use it to explain how money is earned. Personal finance expert Rachel Cruze suggests emphasizing this point: “When you work, you get paid. When you don’t, you don’t get paid.”
Instill the habit of saving
It's never too early to save, and you ought to pass this on to your children as early as possible to foster a savings-centric mindset. An article on 'Savings Strategies for Kids and Teens' by Marcus details how talking to your children about the importance of saving is key to making it a habit both now and in adulthood. Just make sure you explain it in ways that your kid will easily grasp. Make sure, too, that you give your kid opportunities to actually save. A good idea would be to let them fill a piggy bank. Once it's full, use the money to open up your child's own savings account to further reinforce the value of saving and teach them the concept of interest and growth.
Make everything a teachable moment
Everything finance related can be used as a teachable moment. For instance, FamilyEducation recommends taking your kid grocery shopping, and showing them how a family of 4 can save some $1,800 a year if it is done frugally. Teach them about using coupons, taking advantage of sales, seeking bargains, and spending judiciously. You can also follow our tips in our post 'Easy Ways to Simplify Your Life This Year' by upcycling toys, not attending every play date, and buying clothes only when necessary. Then, use these changes to explain the concepts of simple living and living within your means.
Cultivate a charitable heart
One of the pillars related to money is giving (the others being saving and spending), and you must stress its importance right away. Parenting writer Katherine Lee even argues that charity should always be brought up in discussions about money. Doing so puts things in perspective, and will help your child appreciate things like the love of family and having food to eat. The best way to do this is to involve your kid in volunteer and charity work, and show them the rewards of being charitable.
It is never too early to get your kids into good money habits that will serve them throughout their lives. We hope these tips have helped.