Teaching kids about money is important for their financial literacy and it improves their chances of achieving financial independence as adults. Introducing the concept of money from a young age helps children develop a basic understanding of its purpose and value. These early experiences will lay the foundation for their financial understanding as they grow older. As a parent you have the opportunity to intentionally shape your child’s financial perspective for the better. Here are some tips to help you teach kids about money:
1. Start early
Introduce the concept of money from a young age, explaining that it's used to buy things and has value. Engage kids in play activities involving pretend money, such as a store or restaurant where kids can pretend to be buyers, sellers, or cashiers, to help them understand the exchange of money for goods or services.
Talk to children about how money is used in everyday situations, such as buying groceries, paying bills, or going on outings.
Take them along when you go shopping and involve them in simple decisions, such as comparing prices or paying at the checkout.
2. Encourage saving
Teach kids about concepts like income, expenses, budget, savings, and debt in simple terms they can understand.
Encourage kids to save money by setting goals, such as saving for a toy or a special treat. Teach them to save a portion of their money regularly. Explain the benefits of saving for the future and the power of compound interest. Offer additional incentives, such as matching a percentage of their savings, to motivate them to save even more.
Help children understand the importance of budgeting by dividing their money into categories, such as saving, spending, and giving.
3. Practice smart spending
Teach kids to compare prices, look for sales, and make informed purchasing decisions. Discuss needs versus wants. Encourage them to prioritize needs over wants when making spending decisions.
Teach children the importance of patience and delaying immediate desires. Encourage them to think about purchases and consider if they truly need or want an item before buying it.
Plan and make lists: Teach children to plan ahead and make shopping lists before going to the store. This helps them stay focused on what they need and avoid unnecessary purchases.
4. Encourage kids to earn money
Allowing kids to earn money can help them learn about the value of work, money management, and responsibility. Assign age-appropriate chores and create a clear reward system to teach them the value of work and money. Emphasize that completing these tasks is part of being a contributing member of the family.
Encourage kids to explore entrepreneurial ventures such as lemonade stands, selling crafts, or offering services like pet sitting or gardening. This can teach them valuable lessons about business, customer service, and earning income.
Inspire children to take on jobs for neighbours, friends, or family members, such as pet walking, yard work, or babysitting. Help them negotiate fair prices for their services.
5. Introduce kids to the concept of investing
Explain that investing means using money to buy something with the goal of making more money over time. Use relatable examples that kids can understand, such as buying shares of a company they know. Help kids understand that investing involves taking some risks. Explain that while investments can go up and make more money, they can also go down and lose money.
Depending on their age and understanding, involve your child in some investment decisions. Let them choose a company or product they believe in and explain why they think it would be a good investment. Track the investments together and discuss how they are doing. Teach them to analyze performance over time and understand that investments can go up and down.
Encourage your child to ask questions about investing and be open to discussing any concerns or confusion they may have.
6.Teach generosity
Encourage kids to donate a portion of their money to a cause they care about, fostering empathy and a sense of social responsibility.
7. Be a role model
Display responsible financial habits yourself and involve your children in age-appropriate financial discussions and decisions.
8. Let them make mistakes
Allow kids to make small financial mistakes and learn from them. Guide and support them in finding solutions to their money-related challenges.
Remember, financial education is an ongoing process. Tailor the explanations to your child's age and understanding. Keep it simple, interactive, and relate it to their everyday experiences to make it more engaging and comprehensible.
You might also like:
My podcast episode "How do you teach money to kids" with Tania Vasallo (45')
Tania's free "Amplify your Abundance" guide full of practices to help you manifest your dreams.
