Do you want to instill good money habits in your children? There are several ways you can do this, often by starting small and when they’re young.
As parents or guardians, we want to instill habits in children to help them avoid future financial issues. Teaching them about saving, avoiding impulsive spending or overspending can help them avoid unmanageable debt in the future.
Educating them about financial terms when they’re a bit older can also help them avoid poor financial decisions in the future. As financial education is rarely taught in the school system, there is often a huge gap of knowledge for young adults.
That’s why preparing children, familiarizing them with money, instilling good money habits is so important for children of all ages. Here are a few ways you can do this.
Introduce them to physical money
For very young children, one of the first ways to start talking about money is to introduce them to physical money. While very young children may not understand the value of money, you can start early by letting them play around with physical money, teaching them the difference between a penny, nickel, and a dime.
You could ask them to identify which is which or get them to trace around coins just to get them familiar with money.
A piggy bank is a great way to start teaching children about saving. You may want to get a clear container to put coins in so they can always see how much is in there. When your child puts a penny in, try to make a big deal about it to encourage them to save.
Teach them everything costs money
When kids are a bit older and want to buy something, teach them that things cost money. Rather than simply saying “that costs $5 if you want it,” help them count out the money from their piggy bank and physically take them to the store to hand over the cash.
This simple act can teach them the value of money and help them avoid mindless spending in the future.
Turn it into a game
Teaching kids about money doesn’t have to be dry or boring. You can turn it into a bit of a game. There are all sorts of resources online to help you teach kids about money in a fun way. Even a classic board game like Monopoly can teach some valuable lessons.
Some parents like to set up a fake shop at home and get the children to either ‘buy’ or ‘sell’ items. You can ask your children to work out how much things cost and count out any change leftover from these make-believe purchases.
Talk to them about everyday transactions
Try to get into the habit of mentioning everyday transactions with your kids. When you go to the store, ask them to weigh up which bag of chips is better value or talk to them about your total budget.
This will help them understand the value of money and roughly how much things cost vs. how much you must spend.
Give them an incentive to save
Teaching children about good savings habits is one of the best personal finance lessons you can give them.
If they get birthday money, encourage them to save it for something they really love. You might even want to incentivize them to save, for example, by matching each dollar they save.
Talk to them about banks and savings
When they’re a bit older, it’s time to introduce them to banks and savings. Teaching them about physical money is a great start, but they also need to know how banks and ATMs work as well as savings accounts.
Children are probably more used to seeing adults use debit or credit cards in shops, so spend some time explaining how they work.
If they get some money from relatives for birthdays, take them to the bank and have them open up a junior account to deposit the money. Some parents will handle all of this themselves and won’t talk to their child about it, but don’t be afraid to involve them in the process. Even if they think it’s boring, their minds are like sponges and some of it will sink in.
There are lots of different ways you can teach children about money. It doesn’t have to wait until they’re older either. In fact, the earlier you start, the better. You may think they won’t understand but simply getting them familiar with money and discussing it openly can be a great start in their financial education.
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