9 Surprising Ways to Teach Kids to Be Smart with Money
What is your earliest money memory? Most of us remember how we were introduced to money as kids. Maybe through seeing your parents go to work to earn money so that they can buy you toys or getting coins from parents to buy candy on Sundays or a cash offering to give in church.
Most of us try to teach our kids to be smart with money and we think we’re doing the right thing. Teaching them facts and figures, facts of being good with money, using credit cards to make purchases, making family budgets, etc. These lessons however need not to forget that we need to walk the money journey with our kids since they’re little. This ensures their relationship with money is healthy from an early age. Money habits are set by age seven therefore it’s important to start talking about money now!
Below are 9 ways to teach your kids to be money savvy:
1. Examine your attitude towards money and set an example – Kids hear what we talk about money. They see how we make buying decisions every day, they notice how we handle financial situations in our day-to-day lives. If you toss garbage on the roadside, they notice. The same thing goes if you and your partner are always arguing about money, they see that too. If you set a healthy example, they will most likely follow that when they grow older.
2. Use a clear piggy bank to save – Kids are visual too and when they see their savings growing, they will be motivated to keep doing it. Your kid’s early interactions with money will probably involve spending as they see you buying stuff so it’s important to teach them from a young age that money isn’t just about spending – they should be saving regularly too. Help them monitor their savings, set goals, and review them occasionally.
3. Give them commission, not allowances – There are various ways you can involve your kids to help them learn the art of making money from a young age. If you are self-employed, you can ask them to help with part of the work for small pay. Obviously, the tasks will depend on the age of your kid but tasks like shredding papers, sorting small items, participating in garage sales. Some kids are naturally creative therefore as long as it doesn’t conflict with their school schedule parents can support their kids to sell their crafts to friends and family in the church or online. The opportunity here is to help kids learn that to spend money one needs to first earn it.
4. Let them make their own spending decisions – This shows them that stuff costs money. Sometimes it’s not enough to say, “that toy costs $50”. Help them take out a few coins from their jar to buy. Alternatively, ask them to help with tasks (see note 3 above) and pay them a commission for it. This teaches them that money doesn’t come from mom and dad’s wallets but one needs to work to get paid in order to afford the day-to-day stuff.
5. Involve them in family financial planning - Creating a family budget takes teamwork, time and it’s a continuous process since you might need to continuously tweak a few things. As you break down the different areas of a budget with your partner, find areas that are appropriate to discuss with your kids during the process. You obviously don’t want to ask your kids how much you should save for retirement but you can ask them to help with making the grocery list or planning for your next family vacation.
6. Create a culture of giving – I know this sounds counterintuitive. Money is like love, the more you’re open to giving the more it falls back to you. Money is an infinite resource contrary to what we think, there is abundance everywhere if we’re willing to loosen our grip. Teach your kids to volunteer to different causes meaningful to them or to take a few dollars from their piggy bank to buy a sandwich for a homeless folk. This teaches them that money can be split for different purposes. This can also help them understand the idea of setting money aside for reasons like saving for life goals, settling a debt or for retirement.
7. Mental vision board exercise - Mental rehearsal is a powerful tool. Ask your kids to envision what their life would be like in the future. Ask them to draw interesting things they would like to have as adults. This will help them stay motivated and focused, reducing money stress when they grow up.
8. Focus on creating a mindset of abundance instead of scarcity – This can be done through gratitude journaling. For instance, every day before bed you could ask your kids to say five things, they’re grateful for. This exercise will help them focus on what they have instead of what they don’t have. A mindset of abundance is key to developing a healthy relationship with money.
9. Teach kids about credit - Teaching your kids about how credit works and how to spend responsibly will open doors for good money behavior. You can do this by lending them a small amount and letting them pay you back from the extra income they make or from their piggy bank. If they have trouble paying it back encourage them to talk to you and share their challenges after which you can create a repayment plan for them. If they’re old enough to understand credit in-depth, teach them how credit cards and how to use them correctly. The idea is to help them learn how to manage their debt and communicate with their creditors in an open dialogue.
The habits we teach our kids from an early age will most likely shape their financial future, their relationship with money as adults. Good money habits mean freedom… freedom from stress, freedom to make choices, freedom to do whatever brings meaning and purpose, and freedom to serve and help others. On the contrary, bad money habits leads to a lot of financial stress in the future, broken relationships, poor financial decisions which ends up costing us a lot more.
Read: Relationship between financial stress and mental health and how to fix it
What is your earliest memory of money and how do you think that has shaped your relationship with money in your adult life?
Got any questions? Ask a Topspin Finance Money coach.
