Many of today’s parents grew up in an era where talking about money was a taboo subject. Today however, after blindly navigating the world of money themselves, parents are eager to see their children confidently learning good money management. Teaching financial literacy to children may be easier than you think. As a parent, you can teach your children about money through simple yet practical lessons at home.
Earning Pocket money
Regardless of their age, one of the most important lessons you can instil in kids is that money is a finite resource. When they have to work for their money—as you likely do—they’ll learn to use it more carefully.
Many parents are in the habit of supplying their kids with weekly pocket money, which in itself can help teach budgeting skills. Even better would be making them earn that money by doing tasks. Drawing the mental connection between income and personal effort is something that will pay huge dividends when they grow up and move out.
Encourage Part-Time work
High school can be a busy time for adolescents, with Homeschooling lessons and extracurricular activities eating up a substantial part of their week. Still, if they can spare just a few hours to work at a coffee shop or retailer, they’ll probably be better for it. For one thing, they’ll be less inclined to spend their cash on frivolous things when they have to put in some serious work to get it.
You don’t need to wait until they’re old enough for formal employment. You may find that your primary schooler or early high schooler can earn some extra bucks by weeding the garden or walking the neighbour’s dog.
At the point they start earning an actual pay check, you can also help them open a bank account with some of their earnings. It’s a good chance to introduce the concept of the time value of money.
Have Them Contribute to Purchases
Nearly every parent knows what it’s like to take their children to a shop and be inundated with requests for various toys or snacks. Perhaps that shouldn’t be a surprise. Younger children, in particular, don’t yet understand that there’s only so much money you have each month to put down on discretionary purchases.
One way to get the point across is to make them contribute toward these nonessential items. If it’s not their birthday or Christmas, tell them that they have to pay half the cost for a new Lego set. Certainly, your children will get a better sense of what things actually cost. They’ll also learn that they have to save up their pocket money to make bigger purchases and that they have to prioritise, just as you do.
Make It a Game
Who said learning about finances had to be boring? Even board games can help kids learn the importance of good money management.
Monopoly can yield some pretty important lessons, with participants choosing which properties or buying strategies will yield the biggest payoffs and measuring risk versus reward with every move they make.
Open a Bank Account
The piggy bank is a useful savings place for younger children, but when they hit primary school, consider opening a children’s bank’ account at an actual bank. It’s a good way to instil the importance of gradually building up their balance, and it gives them an introduction to the banking industry.
Have Honest Conversations About Money
Perhaps the most important thing you can do to boost your child’s financial literacy is to be open and honest about your family’s finances. Parents often worry that being too candid will only lead to worry, especially if they are going through a job loss or other stressors.
The reality is that somewhere down the line, your children will face their own hardships. They’ll be immeasurably better equipped to handle them if they know how to respond. That doesn’t mean you need to share your bank statements, but you might find it helpful to talk about the need to stick with your budget and cut back on certain nonessentials during lean times.
Kids tend to be a lot more perceptive than parents realise. If they see you making prudent decisions, then they’re likely to imitate those behaviours later in life.
When Do Kids Start Learning Financial Habits?
Earlier than you may think. Researchers at the University of Cambridge have found that many of their habits around money are set by age 7. However, children continue to be financially impressionable right through the teen years. That means it is never too early for parents to start teaching them concepts like thriftiness and delayed gratification.
The Bottom Line is that good money habits don’t form out of thin air—they have to be learned. By starting when your kids are still small, they’ll be better equipped to manage their finances in adulthood, when there’s a lot more at stake.