Build strong financial literacy by teaching kids money is not a choice for parents anymore. Learning about good money habits and proper financial management is a well worth effort for our kids. It helps our children to pave their future income, social status and lifestyle.
Parents should teach children about money regardless of income status. It is not a subject covered in schools. Most people form their opinion about money based on childhood experiences, values and beliefs of their families. Thus, it is crucial children are exposed to discussion and communication on this topic at home.
Each parent may have different beliefs. However, both parents need to establish a consistent approach on the value and beliefs to children when teaching kids money. Here are some examples
- Should we pay children for helping or doing household chores?
- Should we give monetary rewards when kids do well academically?
- Can parents spend away gift money received by or awarded to young kids?
Parent acts as an advisor instead of dictator. Let children know what they can and cannot do based on appropriate age level. Let them face the consequences for violating limits and learn from their mistakes.
Include all family members on money matters discussion and decision.
Do ensure to cover the concepts of earning, spending, saving and growing money.
What better ways for teaching kids money than giving them allowance. This is a hands-on experience for them to learn about how to manage money. It also provides opportunity to learn about budgeting for kids.
Parents should give children allowance as soon as they attend school. This is the time when kids are put in an environment to “learn” on their own. It is time for them to learn about saving and budgeting.
We can determine the amount of allowance by estimating the cost of food, transport and emergency fund required when they are in school. Consider giving out the allowance daily before giving it out on a weekly basis. It allows us to monitor and for the kids to make less expensive mistakes.
It is interesting to go through this phase with kids. We need to impart what’s right and wrong in handling money matters with friends. Here are some lessons learned from me:
- Money is not like toys. We should not share money freely with everyone and anyone.
- Warn kids to be careful with friends who frequently borrow money without the intention to return.
- Just like adults, children are tempted easily. Friends of kids may lure them to buy unnecessary items. Teach kids to prioritize needs and wants.
- Let kids be responsible for their own spending. Never spend all amounts immediately. Save part of the money and plan for future expenditure.
- Apportion allowance amount. Reduce risk of losing money in school by bringing only the amount required.
- Get children piggy banks to encourage saving.
Parents need to educate kids how and where money comes from. Children need to know money does not simply come from ATM cash dispensing machine.
It will come a time when we want our children to be earning their own money. As parents, we need to guide them to ensure the methods are honest and appropriate. They do not fall for any scam or pick up inappropriate habit such as gambling. They need to understand that there is no easy way to earn fast money. Rewards will only come with hard work.
We can help our children to understand the various earning money options available and their preference in the real working world in future.
Kids can pick up some skills along the way while earning money.
We can arrange for the kids to work for a neighbor or relative for pet sitting, gardening or walking the dog.
If you are a work from home parent, you may want to pay your kids for helping out in your home business.
Work in this category let them learn that there is a boss and someone else will determine how much they earn.
Kids can help or market skills they possessed. They can sell self-made craft, provide homework guidance to younger kids in the neighborhood or build a website. Building website based on their passion can turn out to be a business venture eventually.
Kids learn to find out the value of their skill. They may make more money if they improve their skills.
This can be interesting and it helps to spur the young entrepreneur spirits in them. They can set up/participate in garage sale, sell off second hand items on eBay or pay friends to help to collect/gather household items and sell to recycling centers.
Understand what is in demand in the market. Learn research and negotiation skills. They may have to take a risk in making a loss if things cannot sell.
Most kids may not be able to understand the concept of investment initially. Nevertheless, one way is to show them the amount of interest earned in their bank account. Encourage them to save and they will be able to see that the more they save, the more money they earned.
If we have been teaching kids money appropriately, it will come a time when they will take it upon themselves to learn the various instruments and methods for investment to maximize returns.
School has no obligation to build up our kids’ financial literacy. Children may learn how to count money but not the concept of saving, spending, investing and borrowing. Teaching kids’ money by playing games and through planned activities a child can learn more about money.