Teaching your child(ren) about money can be one of the most loving things you can do as a parent. If you want to begin introducing money matters to your child but aren’t sure where to begin, the following tips should help you get started.
There Is No Set Age To Start
There is no set age as to when you should start talking with children about money; it really depends on the child. Typically though, somewhere between the ages of five and seven is a good time to get started. That’s in part because right around this age they’ll start receiving money from grandparents or earning money by helping out around the house.
These realities make it a natural time to start talking with children about finances. Just remember to make money fun and not scary. The best and easiest way to do that is to use everyday events as opportunities to talk about money.
Make It Real to Them
As concrete thinkers, younger children learn from tangible illustrations. When teaching children about money, do it with tangible examples that help them grasp the “why” behind financial decisions. This can be done in a variety of ways, such as:
– Involve them in grocery shopping so you can introduce concepts like budgeting and saving.
– Use real life moments like getting a new car or going on vacation to emphasize the importance of working towards financial goals and achieving them
– Involve them in your comparison shopping so they can understand the importance of spending wisely
The other big key is to involve them in discussions you have as a family related to money. This may feel overwhelming at first, and should be handled as appropriate, but this can be a great way to introduce them to the power of communication in order to reach shared financial goals. Use this as an opportunity to introduce your children to financial topics like interest, debt or even taxes, in an age-appropriate and fun way. For example, introduce the concept of interest by having your children pretend to buy a toy in two different ways – first the full amount outright and second, only a percentage of the amount. In the second scenario, have them continue to pay you up to whatever interest rate you are attempting to illustrate to help them see that buying things on credit and paying interest on those things ends up costing much more in the long run than buying something outright.
Handling Their Money
Consider that 63% of tested high school seniors received failing marks in relation to financial literacy, according to the Jump$tart personal finance test. As a parent, you will want to help your children learn how to manage their money so they can form a healthy framework for financial literacy as they mature.
Helping your children might feel overwhelming, but it can most definitely be done with some of the following methods:
– Establish an allowance system instead of giving them money for nothing
– Help them set “save, spend and set goals” for their money – which allocates certain percentages of everything they receive for a certain purpose
The reason behind both of these is to help children learn that money is not given, but earned, that things cost money, and the importance of setting goals for what you want to do with your money. Those are all relatively simple, yet important skills for children to grasp so they can grow in their understanding of money.
Show Them Ways to Make Money
Besides just giving your children an allowance, think through some creative, age-appropriate ways they can make money for themselves. This could be something as simple as running a lemonade stand or cookie sale in your driveway to thinking of skills they can use to earn money like doing yard work for neighbors, babysitting or even dog walking. By teaching your children to take initiative on making money, you’re setting them up with life skills they’ll greatly benefit from as adults.
Don’t Stop At No
When was the last time you were at the store, your child asked you for something and you replied with a simple “No” and moved on? We all do it and is somewhat natural. It’s understandable as you want to get on with your shopping, but don’t stop with the “No.” Instead, use that as a teachable moment to explain to your child the “Why” behind the “No.”
You can use this moment as a way to point back to a variety of things like wanting to shop on a budget or saving money for something else – or whatever the specific reason is. The point is to allow your child to understand your decision and begin to see wise financial decision making in action. It also helps guard against feelings of deprivation, which can give rise to needless spending as they get older.
Teaching children about money can feel overwhelming, but it doesn’t have to be. Make it fun for your child and the rest will come along.
By John Schmoll, Staff Writer