Teaching Your Kids About Money
Talking about money with your children does not have to be complicated. The best way to accomplish this is to use day-to-day activities and turn them into learning opportunities.
Younger children often do not understand money and its’ value. This is most apparent when you are giving your child coins. For example, if you give your child the choice between a penny, a dime and a nickel they will almost certainly choose the nickel simply because of the larger size. It is highly important to teach your child value at a young age. Likewise, teaching ‘worth’ is another concept that takes time to learn because in a child’s mind they are still dictated by desires and don’t understand the hierarchy of needs. To begin the path to responsible money habits a few easy steps I recommend are:
- Teaching them basic math and value skills – introduce different coins and bills.
- Make chores a regular activity (and explain how they are ‘contributing’ to the family)
- Encourage your child to wait – Patience is a virtue after all
- Explain how if they save they will be able to get something even better (again waiting game)
- Allow them to earn money and spend it how they choose
It is crucial for teens and young adults to understand how to handle money responsibly. Unfortunately, our education system no longer has room for some of the more basic life skills. Young people are graduating high school and have not been taught how to balance their checking account or budget their expenses. The taboo surrounding money matters has created generations that became mired in heavy loads of debt, bad money habits and even many money disorders. While there is a fine line between over sharing or even burdening our children you should try to have earnest and frank conversations with your young adult children about lessons you have learned in life and how best to avoid some major mistakes.
- Explain opportunity cost – spending versus saving and weighing decisions and outcomes
- “Commission” not allowance – money is earned not given
- Discuss impulse buying – again patience is a virtue
- Getting a bank account and allow them to be active in using it
- Get them thinking about college or their dreams and goals – and the correlation with money
Some other great ideas to foster positive money habits and feelings about money:
- Use clear jars to save – a visual of progress of the growing amount is very impactful
- Include them in money transactions – if they are spending their money let them pay the cashier
- Teach contentment – Keeping up with the Jones’ is never a healthy mentality
- Use the digital age to your advantage – budgeting apps such as mint or everydollar
Actively taking steps to prepare your children for their financial future starts at home. Money and finances do not have to be taboo topics or sources of shame. Opening dialog, sharing knowledge and experience is the key to passing on healthy financial habits and patterns to future generations.