Kids and money:

If you don’t teach your children about money, they could learn the hard way. So don’t wait; the sooner you start to help your kids learn about money, the better.

Research suggests starting before age 7 is best because long-term habits are formed by then.¹

In spite of how important the issue of financial literacy is, in a 2019 study, half of the children surveyed said they wish their parents had taught them more about money.¹

Here are some suggestions for teaching your kids about money:

• Use a clear Save Jar.
  Show kids how putting more money into the jar makes their money grow.
• Set the right example.
  Let your children hear and see you talking about money in a healthy way. Kids are always listening – if they hear you argue about money with your spouse, or if you are always whipping out a credit card to pay, they’ll pick up the same habits.
• Demonstrate that things cost money.
  Take them to the store with you when you buy something and pay with cash. They will see both the value and utility of money and that nothing will be handed to them. If mom and dad have to pay for things, they will too.
• Give them a weekly allowance.
  Talk to them about how much money they have and what they might want to spend it on. Set goals for pricier items together, and help your children work towards those. Consider a “matching” system, whereby if your child saves $5, you’ll add another $2, etc. to encourage them.

• Teach the consequences of spending money.
  Explain to your kids that “you can buy these sneakers, but that means you won’t be able to buy the video game you want”. You’ll teach them that managing money wisely is based on the decisions they make, which will also give them a sense of control, ownership and independence.
• Don’t just give your kids money.
  Offer your kids payment for chores above and beyond the usual, so that they understand that, in life, money isn’t given, it’s earned. This will help them to develop a healthy work ethic by linking work with generating money.
• Don’t become the Bank of Mom and Dad.
  Does this sound familiar: “Oh mom I love it, it’s so cute, can we please get it, paleese?” Kids are smart and they’re very good at spending other people’s money. So don’t give in; suggest they consider buying it with their own hard-earned money. Teach them that they are their own bank.

• Encourage them to get a part-time job.
  This fosters a pride of ownership of their money. Help them deposit their pay into a bank account and keep tabs on how much they have put into the account and how much they spend every month. Take 20 minutes a month to sit with them and do this through online banking.
• Teach them the perils of debt.
  Make your child debt averse from the earliest age possible. As they gain access to credit cards, they could get into trouble without the right guidance. Emphasize that running up debt is not an academic achievement, but a ball and chain that will be hard for them to get rid of as they go through life. Less debt = greater prosperity.
• Introduce them to the wonders of compound interest.
  Most people, including children, don’t think of money as fun. Once you clear that hurdle and show kids how they can turn money into more money, you will have shifted the paradigm. Seeing compound interest accumulate is positive reinforcement and just plain fun. It will create active vs. passive financial habits in your child.

(Sources)

¹ How To Teach Your Kids Good Money Habits, Forbes, 2020.