Teaching Kids About Money to Cultivate Good Financial Habits
It’s every parent’s dream to secure their children’s future. Of course, not everyone has the wealth required to do this, and the next best thing you could do as a parent is to teach them how to budget and invest.
Through financial education, you can help your kids develop good money-related habits, such as saving more, spending less than you make, and so on. Therefore, it’s a good thing that kids typically model their parents’ behaviour.
By helping your children cultivate financial literacy sooner rather than later, you’re helping prepare them for a more stable and secure financial future. For this reason, it’s crucial to teach them the following money lessons at different stages in their lives.
Like it or not, kids learn by imitating the behaviour of adults around them.
With toddlers, you can set a good example for them to emulate later. Although they might not fully understand your actions and decisions, tasks like creating a grocery budget, making on-time bill payments, and avoiding impulsive purchases can stick in their minds.
When the time comes, your child will learn how to make better choices, especially when you explain how you make financial decisions.
2. Pre-schoolers and kindergartners
While children at this age might not fully grasp the value of money, you can teach them about the necessity of paying for goods you don’t own but need.
You can take your kids on grocery runs to understand how using money as a medium of exchange works. Emphasise your action of leaving your credit cards at home and paying with actual cash at the supermarket.
3. First to fifth graders
At this stage, your child would already have a rudimentary understanding of what money can buy. They would also be ready to learn about earning and saving money.
During summer holidays, for example, you can assign simple chores to them and pay them a few pennies in exchange. Give them piggy banks or a suitable container to save their earnings, and teach them to save up for things they wish to buy. Perhaps you can even open a savings account for them later.
By fourth and fifth grade, they should already learn the importance of distinguishing needs from wants, and making wise buying decisions or the concept of opportunity costs.
4. Sixth to eighth graders
Now that you’ve already instilled basic financial principles for your middle-schooler to use, you can now move on to concepts involving income, budgeting, contentment, and sharing.
You can talk to your kids casually about what they want to be when they grow up, and use it as an opportunity to have simple discussions on things like salaries, taxes, and insurance, which affect one’s pay cheque. To give them a feel of what budgeting is, let them help you plan for meals or set up a weekly grocery budget.
When one of your kids talks about wanting something their classmate or friend got (e.g., a new gadget), you can introduce the importance of being content with what you have, spending less than what you earn, and sharing what you have with others. Also, it’s crucial to introduce the concept of what an emergency fund is at this stage.
5. High schoolers
If you opened savings accounts for your kids earlier, you can probably let them handle these once they reach high school with the understanding that you can ask to check these anytime. With their savings account, you can already explain the concept of compound interest and making deposits.
You can also start discussing college funding at this stage and work with your kid to save up for university if it’s something they want.
The ability to make smart financial choices is the product of lifelong learning.
By making a conscious decision to help your kids develop good money habits early on, you’re also setting them up for a better financial future.
If this article has inspired you to think about your own unique situation and, more importantly, what you and your family are going through right now, please contact your advice professional.
Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Please consider whether the information is appropriate to your circumstance before acting on it and, where appropriate, seek professional advice.