How to Talk to Your Kids About Money?
Finance is a lifelong commitment whether we like it or not. Unless we’re living in self-sufficient tribes, we need money or some form of currency to survive. Those who know how to handle and maintain their finances get an advantage in life, which is why children should be taught the basics of money from a young age.
Now, teaching the concepts of finance to a bunch of restless kids may sound daunting, but if you use the suitable methods, they’ll grow up to be money experts. So, how do you talk to your kids about money?
How Should I Begin?
Money is not a very interesting topic to children and toddlers, that is why we should find a way for it to be fun.
Start slow, don’t sit them down for a 3-hour lecture about stock exchange, start by answering whatever questions your kids ask you about money and involve them in budgeting before your trip to the supermarket each time.
Make sure you let your children know you’re open to discussing money with them.
Age Appropriate Lessons
As your kids grow, they will go through different phases of cognitive abilities. It is important that you manage your lessons so as to not overwhelm them. In general you can divide the lessons into a few categories. From age 3 to 6, physical money should be a good tool for teaching as tangible cash will feel more real to them as they master counting. This is a good period to talk to them about the value of earning through simple chores, saving via coin banks, and the lifelong practice of giving.
When they grow older, introduce concepts like how money is spent differently for small items like clothing and big items like a house, how work is tied to money etc. Once your kids are more emotionally mature, they will be able to understand more about abstract money concepts, including wants vs needs, debts, and wealth building.
Emphasise on Value, Not Figures
Make your kids understand why they should save money, instead of telling them how much they have to save. Don’t just get stuck on saving as well, show them why budgeting is important, why settling debts help, and why giving and making charitable contributions are meaningful.
It is important that children understand these concepts and the inherent value of practising them so they can live easier lives down the road. With the foundations sown in their minds, they will learn to calculate figures themselves as they grow.
Spending and Saving
Create a savings account for your kids and encourage them to put a fixed amount into that account monthly. Discuss with them about what they’d like to save for, once they’ve met their goals, give them the choice of spending it or to keep it for something else.
This allows them to make an independent decision of whether something is valuable enough that they’d take out money they saved to spend on. Your kids will learn that if they want something, they have to save for it.
Be a Model of Responsible Spending Habits
It is easy even for adults to just throw away something when it’s broken instead of trying to repair it. Not only does repairing and reusing an old item help you save, by teaching your kids to do the same, you are helping to shape a less wasteful generation. Show your kids that each item salvaged is money saved.
More essentially, try not to engage in retail therapy and use shopping as a coping mechanism, your children need to learn to resist the instant gratification gained from purchases. This is important, especially as they reach young adulthood when not having savings can bring serious financial consequences.
You are your children’s main role model, they will shape their financial behaviour based on what they see from you during their formative years.
Provide Opportunities to Budget and Earn
Give your children monthly or weekly allowances for daily essentials, give them advice but then allow them to plan their budgets themselves. On top of that, provide them with opportunities to earn their own money.
For example, you can request younger children to perform household chores in exchange for financial rewards. This will show them the value of money in terms of the work they put in.
For teenagers, you can encourage them to take up part-time jobs or holiday work. As they earn more, give them more responsibilities for their own living costs such as when eating out with friends.
A study by the University of Cambridge found that spending habits in children are formed by the time they’re 7 years old. Where do they get those habits from? The adult figures they observe and interact with the most, of course!
You are your kids’ biggest inspiration for money habits, so it is quintessential that you are smart and careful with your finances. If you love spending with no consideration, chances are, your children will grow up just like you.
Your children’s financial future (for the most part) is in your hands!