As parents, we focus on teaching our children life skills they’ll need as adults. Self-care, work skills, independence but how much do we teach them about money? Do we think they’re too young to know about or handle money? What’s a good age to teach them financial responsibility? Good knowledge of money is a key skill that children will need, to do well later in life.
Like all behaviours, our children do learn about money and how to use it from watching us. This however won’t suffice. Teaching our children to be efficient with money will require a slightly more deliberate and conscious effort on our part. Read on to find out how you can introduce the concept of money to your children and then move on to the bigger steps of investing and saving.
A piggy bank: A favourite childhood memory of mine is of me using a piggy bank. Oh, the joy of dropping in coins and periodically emptying them out to count my “wealth”. All these years later, I still think it’s a great way of introducing money to children. Get them a piggy bank. Let them learn about coins and see how they can amass their wealth with every little coin that goes in. When they’ve saved enough, maybe they’ll decide to spend it on something they want or think of accumulating more. You can encourage them to save up enough for a toy they like which can also help them resist the urge for instant gratification. Win-Win.
Answer their questions: Children by nature are curious about everything that goes on around them. While we might be more inclined to answer questions about their favourite animal or car, we might hesitate to answer their questions about money, primarily because you’ll need to break it down to their level. What does an ATM do, what is a cheque, why can’t you just buy anything you want on Amazon. Answer your child’s questions in the best and most simplified way you can. They will eventually get the idea. Take them with you to the bank or ATM when you can. When they are older, you can introduce the concept of a savings account and explain how interest works. Help them open a bank account for themselves and encourage them to make regular deposits.
Pocket money: This is such a great start to get kids to learn to budget, save and decide what to spend their money on. Depending on their age, and you can start around the age of 5, give your child a monthly allowance. It will teach them to plan and organise too. Don’t expect them to make wise decisions from the start, so brace yourself for times they might lose money or spend it on yet another toy. It is these experiences that can help them make better decisions as they grow older.
Make it fun: Children love to play more than anything. Get creative to see how you can introduce the concept of money through games. There are many board games that use pretend money. With younger kids, you can teach them to identify coins. Ensure they are closely supervised, as toddlers might be tempted to put coins in their mouth. With preschoolers, you can do imaginary shopping or play supermarket. Take them with you to the supermarket, where they can see you choosing items, sticking to a list, billing items and paying for what you need. Find storybooks that talk about money. You can also encourage older kids to take up coin collecting.
Lead by example: Children learn a lot by observing their parents and how they spend money. Do you make impulsive buys, stick to a budget, set a spending limit and wait around to find a good deal? Do you replace their toy right away just because it’s available or buy a gadget as quickly as an upgraded version is out in the market? Give some thought to your own spending habits and make adjustments if needed.
Encourage them to earn money: Summer jobs for older kids are great. But your child doesn’t need to wait until they’re older to earn money. While they can complete their chores without any payment, encourage them to go above and beyond their expected chores to earn some money. They could help with washing the car, or sweeping the backyard or any job around the house that isn’t a daily chore. Let them have the experience and joy of earning money, they are more likely to understand its value.
Allow them to make mistakes: Your child’s first thought about money might be to spend it. After all, that’s what they see you do, use it to make your purchases. Don’t be disheartened by your child’s spending choices, it’s a process. Guide them when they need it and when you can, allow them to make their own decisions about their money. You can gradually introduce them to the concept of saving which is of course an essential money habit. Financial literacy is a much-needed skill that children need, so start them young, even if it means they may not understand much at first. Making money matters a typical conversation will give them better exposure and training.