Teaching kids about money when they’re young lays the foundation for responsible money management later in life. Children whose parents emphasize the importance of financial literacy and encourage them to spend and save thoughtfully develop a healthy perspective on money. As a parent, you want the best for your children. This doesn’t necessarily mean you want them to have the best clothes, the latest toys, or the coolest gadgets. Most likely, it means you want them to be safe and secure. And you want to lay a foundation that they can build upon to do well in life.
However, just as these top-in-the-market items are necessary for your child’s grooming, so is teaching them about money and giving them the key lesson regarding financial literacy. According to statistics and reports, nearly half of parents say they miss opportunities to talk to their kids about money and finances. Even if you’re not teaching your kids, they will learn lessons about money one way or another. If you want to play a key role in shaping your children’s feelings, thinking, and values about money, you need to give them the gift of financial literacy from an early age.
Here’s how you can guide your children towards a more financially responsible future:
Show them that stuff costs money
Explain what money is and how it is used; practically showing them how money works is more effective. So, let them see you making purchases with cash. When kids see the currency notes popping out of the ATM, they don't realize that money is a finite resource. Explain that you work hard to make money, and a bank is just a place that keeps it safe.
Successful money management includes keeping records of money spent. This includes knowing how much money is available, how much money has been spent, and how much money must be saved for future needs. This lesson introduces elementary-aged children to the concept of being responsible for managing money through accurate record-keeping. It provides them with activities and worksheets that demonstrate the need to be accountable for how they spend and save money.
Preach the three principles: giving, saving, and spending
Giving is one of the most important of the three categories because you’re teaching them to feel the impact of helping others at a young age. As for saving and spending, encourage your child to set aside some of their money for savings and some for spending each time they get paid. Remind them that once their money is gone, it’s gone. Help them embrace their mistakes and understand where they went wrong. Mistakes are a lesson while they are under your roof.
Create opportunities to earn
Kids need to have money of their own so they can learn how to make decisions about using it. An allowance can accomplish that. However, you should consider requiring your kids to do certain chores to earn their allowance. Young children perform certain tasks at home just because they are part of the family or household. Children can do additional tasks to earn money for their spending plans. Children need to distinguish between shared responsibilities as members of a family and responsibilities that earn them money. This lesson introduces young children to activities and ideas for earning money. The money earned helps children meet their financial goals. Remember that the financial goals for a child may seem simple to an adult, but they are not simple to the child. Children learn the concept that money is a reward for working.