How To Teach Children About Money
If you’re sensible with money, then it’s only natural that you’ll want to pass on these skills to your children. It can be difficult to teach children about money. Too much information can make them worry too much about money, whereas not telling them enough can make it hard for them to manage and understand their money later in life. There are lots of ways that you can start teaching children of all ages about money in a way that they can understand.
Pre-Schoolers and Kindergartners
A piggy bank is a good idea, but for young children, not being able to see their money can be confusing. A clear savings jar means they can see their money growing, giving them a better idea of how saving money actually works.
You should make sure you’re modeling good habits with money. Even young children will notice if you and your spouse argue about money, or if you put everything on credit cards. Make good money habits, and model those in front of your children.
Make sure that your kids understand that things cost money. Do this by doing more than just telling them the price of things. If they want a toy that costs $5, take your child to take the coins they need from their savings jar and make them be the ones who give the money to the cashier when you buy the toy.
Start teaching your kids that they might have to wait for things that they want. Delayed gratification can be hard for toddlers to grasp, but they can learn the idea. When you go into a store together for something specific, remind them why you’re there. Tell them that you’re shopping for a gift for their grandparent, for example, not for things for them.
Elementary Students and Middle Schoolers
Keep talking to older children about money. Show opportunity cost. For example, tell them that if they choose to buy an expensive video game, then they won’t have enough money left to buy the trendy shoes they want. By this age, your child should be able to weigh their decisions and understand the outcomes of how they decide to spend their money.
Think about not giving your child an allowance. Instead, pay them a ‘commission’ for completing household chores, like taking out the trash, wash dishes after dinner, or mowing the grass. This helps children to understand that money has to be earned, rather than just given to them. Don’t reward them with money for things like academic success though, as this can make less gifted children feel awful and very upset.
Teach your children to avoid impulse purchases. At this age, children are masters of the impulse buy, and will often ask you for things. Instead of immediately giving in, remind your child that they can buy things themselves with their earned commission. Encourage them to wait at least a day before they buy anything expensive though. They can learn to make more level decisions about how to spend their money.
Once your children have a little money saved up from their commissions, you can start to teach them about giving. Help them to choose a charity or other cause that they would like to help. They can learn that giving helps the receiver, and the giver too.
Have your child set spending goals. For example, perhaps they want to buy a specific toy. Make sure they don’t choose something too expensive, or they’ll give up saving before they get there. Help them to understand savings by getting them to save themselves for something they want, instead of giving them the money. This helps children to grasp the value of money and why saving is important to do. When they add money to their savings jar, count up how much they have, and work out together how much more they need.
Involve your child in decisions about money. Start with simple ideas, like explaining why you buy paper towels in bulk or buy store-brand soda to save money. They can start to understand the every day choices that people have to make about how they spend their money.
Start teaching your teenagers to be contented with what they have. Most teenagers spend a lot of time on social media. All that time online is being spent seeing a highlight reel of other people’s lives. Seeing this leads to them making comparisons, and not always favorable ones. They might want a more expensive car or an expensive birthday party. Remind that their old car might not be new and exciting, but it still does the job perfectly well. Help them to learn to be content with what they already have instead of coveting what others have. If they’re contented, they’re much less likely to spend money they don’t have to keep up on social media.
By the time that your children are teenagers, you should get them set up with a simple bank account of their own. Whether they’re earning money from chores, or from a Saturday job, they need somewhere to keep it but have probably outgrown a piggy bank. Having a bank account of their own takes money management up a level, and helps to prepare them for handling their own money as they get older.
It’s never too early to get them started on saving for college. Encourage your teens to start thinking about the money they will need for college (or to move out, if they don’t want to go to college). They could get a summer job, and start putting some of their earnings into a savings account for their future. Saving for themselves teaches them to save, and will help them to take it seriously, as it’s an investment for something specific in their own future.
Before your teenager starts to apply for colleges, sit down with them, and have a serious talk about money. Speak to them about how they will pay for college and their expenses when they’re there. If they’re considering student loans to pay for college, discuss cheaper alternatives like community college, going to an in-state university, or applying for scholarships early. Make sure they understand how to manage their money while they’re at college and beyond. Even if they won’t use these methods now, they need to have financial knowledge for adulthood, from the risks of credit cards, and when to turn to emergency funding options like online installment loans with Wise Loan.
Once your teenager turns 18, they will begin to be hassled by credit card firms, trying to sign them up while they’re still naive about debt. Credit card companies will go after college students in particular, as they are most likely to run up credit card bills that they can’t afford. Make sure you teach them about credit cards and the risk of debt from using them, or they’ll be likely to become yet another victim of unscrupulous credit card companies. Decide when is the right time to teach them about debt, without scaring them.
Get your teenagers on a budget as soon as you can. Teenagers are glued to their mobile devices all day anyway, then you might as well get them to use a simple budgeting app. It’s an ideal time to get your teenagers into the habit of budgeting their income, even if their income is still small. Keeping track of your incomings and outgoings is a good habit to get into. Help your teen to learn how important it is to make a plan for their money.
It’s never too early to start teaching your children about money, no matter how young they are. There are age-appropriate ways to talk to and teach all children about money. The earlier you can start, the more money savvy your child will be later on in life. Make sure your children are being taught about spending and saving money, so they can make smart financial decisions for themselves as they get older.
When your children have their own money, try to step back a little to make their own choices. They will make mistakes with their money but this needs to happen so they can learn from their own mistakes and from the consequences of their actions. If they experience negative consequences from poor money choices, they will learn to make smarter financial decisions for themselves afterward. If you’re worried about expensive mistakes, let your child or teenager take responsibility for small amounts of money. Making mistakes really is one of the best ways to learn.
Lead by example, whatever age your children are. Parents have a lot of influence over their children, and unfortunately, it’s not only the positive messages that will resonate. Children will copy what you do, not what you say. Don’t model behavior like shopping as a leisure activity, so you don’t accidentally teach your children that money is an unlimited resource and that spending it is fun.
Always try to be honest about money with your children (in a way that is appropriate for their age), and have open conversations with them to help them learn.