From piggy banks to bank accounts and credit cards, when it comes to teaching your kids about money, where do you start? If you want to give your kids a financial education but you’re feeling overwhelmed with what to teach, we have you covered. This article will outline some important financial topics and teaching tips that you can use to give your child a financial education.
Teaching Kids About Spending Habits
If you want to help your kids avoid a life full of debt and meaningless spending, then teaching them positive spending habits should be at the top of your financial literacy lesson plan. One of the best ways you can teach your kids smart spending habits is by actually modelling them yourself. When it comes to kiddos, it’s monkey see, monkey do, right? If you go to the grocery store without a list or a budget, you are showing them that this is the way it’s done.
With young kids, you can start to develop good spending habits by teaching the concept of delayed gratification. Delayed gratification is the ability to wait for something that you want. It’s about self-control. If you can teach your children this skill when they’re young, it can help them control their spending habits later in life. Rather than going to a store and impulsively spending their money, they will have the skills required to wait and save up for what they want instead.
Teaching Kids About Saving Money
The concept of saving for a rainy day sounds logical and simple but without some guidance and practice, it can be difficult to do. The lesson here is that life is uncertain and you never know what the next day will bring. So, it’s important to be financially prepared for the unexpected.
Saving is also an essential skill to learn if you want to be able to buy things without going into debt. You can teach your child the value of saving by instilling savings goals. If they want a new bike or a new toy that costs $100, then they will have to save. Whether they are earning a weekly allowance or working at a part-time job, talk to them about how much they will have to save and for how long if they want to meet their savings goal.
With school-aged children, you can take them to open their first bank account so they can save their money there. With younger kids, you can introduce the concept of saving by using a simple piggy bank. Kids can physically feel how their money is growing over time and even hear it when they shake their full piggy bank. Once their piggy bank is full you can reward them by taking them to the store to buy a special toy or treat.
Teaching Kids About Budgeting
Even most adults shy away from budgeting. But it doesn’t have to be complicated. Introduce the concept of a budget to your kids simply as “a plan for their money.” Rather than spending haphazardly, a budget gives your money a purpose. You want that new bike, well then you don’t have room in your budget to buy a new toy every week.
Teaching your kids how to budget can be as simple as sitting down with a pen and paper, folding the paper in half and labelling one side “income” and the other side “expenses.” Ask them how much they bring in each month from allowance or their first job and have them write it down on the income side.
For expenses, how much do they spend when they go out with their friends, or how much do they want to spend on a toy or social activity — have them write it down under expenses. Then subtract income from expenses (income – expenses). Do they have enough to cover all of their expenses? If not, then you can have a conversation about how to make more money or how to cut expenses. If they have a surplus of money then you can discuss saving and investing. Knowing how to balance a budget is a basic financial skill that will serve them well now and in the future.
- Get more: Easy Ways for Kids to Earn Money
Teaching Kids About Investing Their Money
Investing is one of those financial concepts that many parents shy away from because they don’t fully understand it. But, it doesn’t have to be complicated. If you are nervous about talking to your kids about investing, use this as an opportunity for you to improve your financial literacy. There are plenty of free websites, podcasts, and library books on the topic of investing that you can use to expand your knowledge.
The concept of investing is an important one because it helps to provide financial security for the future. If you were to just take all your savings and stuff them under your mattress (or in your bank account) for the next 20 or 30 years, the purchasing power of your money would depreciate. To combat the effects of inflation and actually grow your money, investing is essential.
There are plenty of age-appropriate lessons you can use to teach your kids about investing. With school-aged children, you can talk about the difference between risk and reward. When you invest in the stock market, there is risk involved but there is also the potential for reward. With older children in middle school and high school, get them involved with your investments. Show them what you invest in and how the value of your investments has changed over time. You can even consider opening a brokerage account for your child and helping them learn to invest. Let them pick and purchase a few stocks with their own money and track their investments over time. This can be a very engaging and educational experience. Make it your job to be there for guidance and to answer all of their questions.
Teaching Kids About Financial Planning for the Future
We aren’t born knowing how to create a budget, open a bank account, or invest. Yet these are skills that every person needs to know to properly manage their money. Any lessons you can teach your kids about money will help them have a brighter financial future. Whether it’s sitting down and having regular open conversations about money, playing money-based games with your kids, or providing the necessary learning tools they need to develop their financial literacy, giving your kids a financial foundation is truly one of the most useful gifts you can give as a parent.
— By Jessica Martel