As a parent, the most important thing is ensuring that your kids are safe and secure. You need to lay a foundation that they can build upon to succeed in life. One of the biggest lessons is teaching them about money. It is important to help your kids become financially literate. Money is involved in every aspect of life. From clothes, food, education, cars, air-conditioning, entertainment, insurance—name it all! However, most parents are reluctant to discuss financial topics with their children due to their reasons.
Whether you educate your kids about money or not, they will always find a way to learn about it, one way or another. If you want to learn how to shape your children’s perception of money, here’s how.
Start with the basics at a young age
The earlier you start teaching your child about money, the earlier they develop money habits and attitudes. While young children can’t understand the value of money, money lessons should however start before the age of 7. 2-3year old children will mostly think about putting a penny in their mouth or choosing a nickel because of its size. With them, they can start by learning the names of coins. Help them differentiate coins in terms of color, shape, and size through a coin identification game, where they match a coin to its image while discussing their names. Ensure that you provide close supervision since they may try to swallow the coins.
They also love to play store, which helps exercise their imagination. Through exchanging play money for goods, they begin to understand the basics of commerce. You can join them, make pretend money, and shop. For pre-schoolers (aged between 4 and 5), they would rather play imaginary restaurant than go out for dinner. You can play with them and remind them that after the pretend meal, they have to pay for the bill.” Once they understand the concept, they get very excited about paying with pretend money or making change as the cashier.” says Dorothy Singer, Ed.D., a senior research scientist at Yale University in New Haven, CT.
Once your kids are old enough, from age 6, you can explain what money is and how it is used. Let them see you make purchases with cash. Even when using a debit or credit card, explain to them that it is similar to using money when making purchases. Do it over and over until they develop the habit of using money.
Teach them how to save
Your kids will see you using money to purchase, and their first interaction with money will involve spending. Ages between 6 and 8 are mostly involved in collecting coins as a hobby. You can instill the idea of saving in a clear jar, where they can keep coins they have collected and watch them pile up with time. Help them grab a few dollars from the jar, go with them to the store and introduce them to price tags. Let them make their first purchase as you explain the process of picking the right item from the shelf while considering the price, quantity, and quality of each item. Allow them to physically hand the money to the cashier and keep any change that is left.
Saving is essential as it teaches goal-setting and planning, prepares you for emergencies, and helps build security and independence. Saving however for young kids will require you to teach them how to save for short-term goals rather than for the future. As they grow older, teach them about saving for long-term goals. When they begin to earn their own money, they will learn that some items cost more than others and must save to reach larger goals.
Your kids emulate everything you do. If you constantly purchase every time you go out for dinner or to the grocery store, they will notice that. If you and your partner often argue about money, they will notice that too. Set a good example to your kids, and they are more likely to follow that as they grow older. Remember also to mention where the money comes from, that they need to work to be paid. Don’t forget to introduce charitable habits at an early age and remind them the importance of giving 10% of their money to helping others.