Here are some useful tips that you can use to help teach your kids about money. The key is to get started early and to relate finances to every day life. Here is our list…
1. Introduce them to the concept of money as soon as they can count. Children who grasp the concept of money can soon thereafter learn about interest. Consider including loans from you to your preteen and vice versa so that the idea of compound interest being a friend to investors and an enemy to borrowers really sinks in.
2. Teach by example. Children learn by observing and imitating. When you use an ATM, write a check or visit the bank for other business, explain what you are doing. When you make a purchase that’s not routine, explain why you chose that item and why it is worth the cost. Children will absorb your attitudes and values by implication in addition to gaining familiarity with basic financial concepts and actions.
3. Use grocery shopping as a classroom for financial education, since nearly a third of the average household’s take-home pay is spent there. It is where you can demonstrate the value of comparing prices per unit, using coupons and shopping for sales and produce that is in season. To make the lesson really stick, take the amount you saved using sales and coupons and put it in a jar. When it gets full, have your child take a small portion for a reward and put the rest in the bank.
4. Let them make decisions, good and bad. Children and young adults need to see and understand the consequences of each decision they make, and they won’t learn if you step in and stop them from blowing all their cash on candy or toys. Better to learn from spending a week’s allowance on candy as children than to learn from maxing out a credit card in college.
5. Teach them the difference between “wants” and “needs.” Introduce the subtleties of the difference as children mature. For example, when shopping for school items, you admit that your child needs new clothes, but does he or she need a triple-digit clothes budget? For older children and preteens, you can set a price limit for a needed item; they should understand that as a parent you will pay for what they “need,” but they must use money from birthdays or chores to buy “wants.”
6. Critical examination of advertising on television, radio, print and all around you is a consumer skill adults practice without thinking about it. Practicing it with your children can help them learn to think critically about the media they absorb and how it affects their spending habits. Ask thought-provoking questions such as…
- What message does the ad give you?
- Are the product’s claims realistic?
- Are there less expensive but equally useful alternatives?
- Is the sale price really a good deal?
- What other items could you buy if you didn’t buy this?
It’s never too early to teach a child about money if you fit the lessons to the appropriate age group. Incorporate teaching moments into everyday situations will teach your child fiscal responsibility without making it a chore for both of you.
Have any comments or advice of your own to share?