The problem with children and money is that they don’t comprehend it on an instinctive level.
Although it seems unusual, give the idea some thought. We give young children food when they are hungry. We offer them a drink when they’re thirsty. Clothes? They wear the things we purchase them, wash them, and then put them back on.
Children naturally learn that there is some form of commerce involved and that we swap money for commodities over time. But the most essential present you can offer them is to pay attention to what they learn about it and how they begin to think about financial matters.
Even though fostering financial literacy in our kids from a young age can benefit them for the rest of their life, many parents avoid the subject. According to T. Rowe Price’s 11th Annual Parents, Kids & Money Survey, more than a third of parents said they only talked about money or financial matters with their kids once a month or less, and 8% said they never brought it up.
Where to begin
Explain to your kids that everything costs money, which you obtain via employment. Talking about items that are important to them, such as their favorite game, a soccer ball, or a new school shirt, might be very useful. You may also present them with a number of receipts to demonstrate the prices of various goods. Even practicing the idea while playing the board game Monopoly might assist.
If you regularly pay with a credit card, make an effort to do so when you are out shopping with your children so they can see the transaction. Unlike the impact of witnessing you swipe a credit card, there is something extremely concrete about seeing you give over cash.
When using a credit card, be sure to mention that you have the money for the purchase stored in a bank account. Help your kids realize that after making a purchase using a credit or debit card, you must withdraw the funds from your bank account to cover the cost of the item.
Help Them Understand Why We Save
The second stage is to teach your kids that money is earned and saved before it is spent, and that it is not necessary to spend all of it at once.
Your kids will comprehend that when they wish to acquire something, it costs money once you’ve covered the fundamentals. And in order to spend that money, it had to first be earned and saved.
This final point is crucial: Tell your kids how vital it is to save part of the money you make so you can utilize it later.
For instance, when I was a young child, my father would explain the value of saving to my brothers and me, pointing out that the funds might be used for a variety of things, including our college expenses, a new car, birthday presents, and family trips. My father always reminded me to start saving now since starting later would be much more difficult. He was correct.
Important Lesson Points
- Tell your children about instances in which you had to use the money you had saved in real life. You might also discuss unforeseen requirements that emerge, such as a vehicle accident or an unexpected layoff, in addition to the enjoyable topics described above. You should adapt the examples to your family and your children’s sensibilities since you want them to grasp why conserving money is a good thing rather than being alarmed by potential disasters.
- Explain how your funds enabled you to cover those unforeseen expenses as you discuss the financial repercussions of your choice of scenario (in kid-friendly words, of course). It’s possible that you were able to pay for auto repairs, for instance, without having a significant impact on your regular financial situation. You may also explain how challenging it would be to pay for auto repairs without funds and offer them examples of other things you’d have to give up in that case, like going to the movies or purchasing presents.
- Conversely, tell your children about a nice purchase you made after saving for it, such as new kitchen countertops, a piece of jewelry, a family vacation, or their bicycle. Make it concrete so they can see what you can do with the money you saved and the exceptional item you were able to purchase.
- Teach your kids to save money as a habit. Encourage kids to save their coins and cash in a piggy bank of some type. My parents started a family economy by using transparent, rectangular plastic containers. Lead by example while you advocate for saving money. Saying something like, “I feel so good about saving portion of my earnings for the future,” or “Saving money makes me feel amazing,” might help to emphasize the advantages.
Make It Real
Your kids probably have varied learning preferences, so some of them could naturally understand these ideas faster than others. That’s alright. Continue educating in whichever method is effective.
No matter how they learn, repetition and consistency are essential. We used to say things like “First we earn money, then we save money, then we spend money” every single night while I was growing up.
Make careful to include examples from your daily life to demonstrate the idea of enjoying your money. For instance, if you’re going to the movies, explain to your kids that tickets and popcorn are not free.
Inform them that you are setting aside some of your earnings in order to buy tickets for everyone to the movies. When you arrive, you may rejoice because the money you saved will cover a fun-filled evening for the entire family. It’s a fantastic teaching opportunity that solidifies the notion that conserving money benefits everyone.